Shona
If you purchased 50% of your parents' main residence at open market value, this would have the following tax consequences:
CAPITAL GAINS TAX (CGT)
The sale would be treated as being at open market value for CGT purposes as you are connected persons. If the property has always been your parents' only main residence, they will be entitled to 100% Principal Private Residence (PPR) Relief and therefore no CGT liability will arise.
However, any future gain attributable to your share of the property would result in a CGT charge to you as you would not have any entitlement to PPR Relief.
This problem could be overcome if you were to transfer your share in the property to a discretionary trust with your parents (as well as you and your sister) as beneficiaries.
STAMP DUTY
You would be liable to pay 1% stamp duty on the transfer if the value transferred exceeded £60,000.
INHERITANCE TAX (IHT)
Providing the transfer was made a open market value the transfer would remove the asset from your parents' estate for IHT purposes, but would replace it with cash. IHT planning may not be relevant if their joint estates are worth less than £255,000. If their joint estates are worth between £255,000 amd £510,000 I would recommend that they should ensure that their wills are IHT efficient.
INCOME TAX
If you charged your parents rent in respect of the use of your share in their home, you could obtain tax relief in respect of mortgage interest payable to reduce or eliminate any income tax charge on rental profits.
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