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Where Taxpayers and Advisers Meet

Informal Opinion - Advice or Comment

JEFF26R
Posts:18
Joined:Mon Mar 08, 2021 3:16 pm
Informal Opinion - Advice or Comment

Postby JEFF26R » Sun Apr 04, 2021 9:55 pm

Son (S) with only one UK freehold property (100% equity) with no mortgage, but future French CGT liability.

S planning to reside in France from July, and wishes to remove future high CGT in France, from sale of UK property.

As the property can not be sold before S moves to France, as mother (M) and father (F) are happily residing there, with S, what are the implications of S transferring 50% equity to M and F as a repayment of a loan (have the original bank transfers), and S selling remaining 50% equity to M and F for £375,000 which they loan under a contract, which states that they have to repay the loan when the house is sold for 50% of the total sale amount. Property is currently valued at £750,000

Presuming this would be judged as loans, there would be no gifting on S part, so S estate would be unaffected if he were to die.
Maybe the contract could say, on the event of S death, before the loan was repaid, who S wishes the benefeceries to be.
S would have no UK tax liability at time of transfer or future sale or loan repayments.

M and F would not be due to pay any Stamp Duty on the transfer.

As the property is not guesstimated to be worth more than £850,000 at time of sale and as M and F have leas than £150,000 in other assets, M and F estate would not incur any IHT at time of either of their deaths.
If M and F reside there until its sold, M and F would not have any CGT liability.
If M or F needed to enter residential care, the loan for 50% of the property would be protected from the local authority.
The loan could be the first thing to be settled on the sale of the property, or as part of the estate in the event of M or F death.

JEFF26R
Posts:18
Joined:Mon Mar 08, 2021 3:16 pm

Re: Informal Opinion - Advice or Comment

Postby JEFF26R » Mon Apr 05, 2021 3:08 pm

What are the implications of transferring 50% of S equity as the repayment of the loan to M and F, and selling M and F 10% for £80,000. I presume that this 60% transfer would be regarded as a chargeable consideration. As this chargeable consideration is £455,000 I presume that no Stamp Duty is due at the current levels.
To avoid any Stamp Duty, would S then need to gift M and F the remaining 40%, or is there any other solutions?

This gift for £320,000 would be considered for seven years, and taken from S nil rate band if he died within the seven years. Seeing as S has a French spouse (FS) as his beneficiary and his UK estate will be worth less than £200,000 I presume in the event of the death of S within the seven years of the gift, S estate would not have any IHT due, as FS is exempt.

If S were to loan M and F the money to buy the remaining 40% equity for £320,000, I presume that this would take M and F chargeable consideration to £775,000,which is over the current nil rate Stamp Duty, and M and F would need to pay the duty.

I presume that S would have no tax liability at either the time of transfer or future sale.

M and F would not be due to pay any Stamp Duty on the transfer.

As the property is not expected to be worth more than £850,000 at time of sale and as M and F have less than £100,000 in other assets, M and F would not incur any IHT at time of death.

If M and F reside there until its sold, they would not have any CGT liability.

Could M and F update their wills to state that they want 40% of the sale of their property to be left to S in the event of either of their deaths, and the remainder goes to the surviving spouse?

If this understanding is correct, are there more than one potential negative situation?

One
If M and F needed to enter residential care, S may lose his gift if M and F estate is spent on their care.
I presume that M and F can own 50% each as tenants in common to help mitigate the risks.

Would a Trust be more appropriate?

Any other ideas welcomed.

JEFF26R
Posts:18
Joined:Mon Mar 08, 2021 3:16 pm

Re: Informal Opinion - Advice or Comment

Postby JEFF26R » Mon Apr 05, 2021 3:17 pm

What are the implications of transferring 50% of S equity as the repayment of the loan to M and F, and selling M and F 10% for £80,000. I presume that this 60% transfer would be regarded as a chargeable consideration. As this chargeable consideration is £455,000 I presume that no Stamp Duty is due at the current levels.
To avoid any Stamp Duty, would S then need to gift M and F the remaining 40%, or is there any other solutions?

This gift for £320,000 would be considered for seven years, and taken from S nil rate band if he died within the seven years. Seeing as S has a French spouse (FS) as his beneficiary and his UK estate will be worth less than £200,000 I presume in the event of the death of S within the seven years of the gift, S estate would not have any IHT due, as FS is exempt.

If S were to loan M and F the money to buy the remaining 40% equity for £320,000, I presume that this would take M and F chargeable consideration to £775,000,which is over the current nil rate Stamp Duty, and M and F would need to pay the duty.

I presume that S would have no tax liability at either the time of transfer or future sale.

M and F would not be due to pay any Stamp Duty on the transfer.

As the property is not expected to be worth more than £850,000 at time of sale and as M and F have less than £100,000 in other assets, M and F would not incur any IHT at time of death.

If M and F reside there until its sold, they would not have any CGT liability.

Could M and F update their wills to state that they want 40% of the sale of their property to be left to S in the event of either of their deaths, and the remainder goes to the surviving spouse?

If this understanding is correct, are there more than one potential negative situation?

One
If M and F needed to enter residential care, S may lose his gift if M and F estate is spent on their care.
I presume that M and F can own 50% each as tenants in common to help mitigate the risks.

Would a Trust be more appropriate?

Any other ideas welcomed.


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