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Where Taxpayers and Advisers Meet

Stamp duty and IHT: complex problem

mail@miltonmount.fsn
Posts:1
Joined:Wed Aug 06, 2008 3:04 pm

Postby mail@miltonmount.fsn » Wed Aug 06, 2003 11:48 am

Our family home is registered in my fathers sole name even though my mother and I are the only ones that have lived there for the last 12 years. My mother (who is still married to my father) has registered her right of occupation under the Matrimonial Homes Act 1983. My mother also has a Power of Attorney under the 1971 Power of Attorney Act in respect of the property. My father lives abroad and is threatening to come back and remortgage the house (currently there is no financial charge on the property as it is owned outright). Can my mother use the power of attorney to transfer the house jointly onto her name and mine ??? Would stamp duty be payable on this transfer and would I have an IHT liability upon her demise?? Value is around £475,000. I am 26 years old. thank you.

Nigel Lord
Posts:518
Joined:Wed Aug 06, 2008 2:18 pm

Postby Nigel Lord » Thu Aug 07, 2003 12:51 am

This is primarily a matrimonial law question. I will restrict my comments to the tax implications. You should seek legal advice regarding the validity of the proposed transfer.

As your parents are separated, and your father does not live in the property, it is not his main residence (PPR) for CGT purposes. Normally, there would be a tax charge if it was transferred to you and/or your mother based on the open market value as you are connected persons. However, there is an Inland Revenue concession (D6) that would allow the transfer to your mother only, providing:

1. It is part of a financial settlement, and

2. She contines to live there, and

3. Your father has not made a PPR election in the intervening period.

You state that your father is abroad. If he has been non-resident for 5 full tax years, he could transfer the property to you and/or your mother without any liability to UK CGT. There may, however, be tax to pay in the jurisdiction where he is resident (please indicate), and you should take advice in this connection.

Stamp duty would be payable on the transfer at the following rates:

£0 - £60,000 = £5
£60,001 - £250,000 = 1%
£250,001 - £500,000 = 3%
£500,001+ = 4%

Therefore a gift would result in only a nominal charge.

I assume that your father is domiciled in the UK and therefore liable to Inheritance Tax (IHT) on his global estate. The Spouse exemption for IHT remains after separation until divorce. Therefore, no IHT consequences would arise if the property was tranferred from your father to your mother. If part or all of it was transferred to you, this would be treated as a Potentially Exempt Transfer (PET). No tax would arise on the transfer, but tax could arise if your father died within 7 years of the transfer if the nil rate band (£255,000) for IHT was exceeded.

If you intend to make any transfers, I suggest that you seek professional tax advice to ensure that CGT and IHT exposure is minimised.

If you require any further assistance please do not hesitate to contact us, and we will be happy to act on your behalf.

Nigel Lord
Lord Associates
Taxation & Business Consultants
Caxton House
Old Station Road
Loughton
Essex, IG10 4PE
020 8418 9101 & 07769 931852
mail@lordassociates.co.uk


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