Property transfer

[Alan p]

Hi, We loaned our daughter £115k to purchase a property 5 years ago, no mortgage on property.
She has now moved to another part of the country and wants to transfer it back to us and buy one herself with mortgage.
Property is now valued at £120k, how do we do it, I have downloaded a TR1 form from land registry.

Alan

[TaxAdviser2018]

Hi Alan

As the property was acquired by your daughter, prima facia, it is your daughter's asset and presumably her main and only residence. If this is the case, she could gift the property to you under a deed of gift. As it is her main residence, there would be no tax on any gain and you would be deemed to have acquired it at open market value i.e. £120,000. On the issue of Inheritance Tax (IHT), if your daughter was to predecease you and not survive seven years from the date of the gift, IHT would be payable on the gift.

One aspect to consider is that if your daughter gifts the property back to you, it will be part of your estate for IHT purposes and therefore you may wish to consider whether to gift the loan of £115,000 to your daughter and for the property to remain in her name and kept as an investment property. This would have Stamp Duty Land Tax implications when your daugther acquires a second property.

In terms of transferring the property to you in terms of both legal and beneficial interest you will need to complete, sign and register the TR1 and complete and file the SDLT1. Without a formal conveyance, you are accepting any inherent issues with the property and therefore may wish to instruct a conveyancing solicitor to under the relevant enquiries etc and draft the sale and purchase contract.

[someone]

One aspect to consider is that if your daughter gifts the property back to you, it will be part of your estate for IHT purposes

The OP talks of a loan. I'm assuming the transfer discharges the loan therefore 3% SDLT on 115k may be due.

But the OPs estate doesn't (significantly) change in value so doesn't affect IHT.

I'd guess that the OP could make a gift to discharge the loan, which would avoid the SDLT but then the gift would be part of the OPs estate for 7 years.

I'd also seek professional advice about whether the two gifts would be seen by HMRC as linked transactions and not really gifts at all.