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Where Taxpayers and Advisers Meet

PET - Help

Dev_1
Posts: 18
Joined: Sun Jun 18, 2017 4:00 pm

PET - Help

Postby Dev_1 » Wed May 15, 2019 4:06 pm

Hello,

Thank you for taking the time to read this, any opinion will be greatly appreciated.

During June 2010 I was added to the land registry documents for my mothers home, essentially we both became owners of the property.

We both continued to live at this address till jan 2016.

We both shared the bills and all costs associated equally.

I went onto purchase a house in January 2016 in my sole name and my mother moved in with me where she now stays.

The previous address has now become a BTL property.

Having read mixed articles can anyone clarify how the below would effect the 7 year rule.

I have read articles where they say that if a gift is made and my mother continues to reside at the same address as me then she must live at this address for there 7 years (i am referring to our first home not where my mother lives now).

We both moved out 18 months before the full 7 years, can someone please clarify if this will be an issue.

I was always under the impression that the 7 year rule applies to surviving 7 years after the gift was made, not actually residing at the address for 7 years.

Can some please assist with clarifying this for me please.

Kind regards

Dev_1
Posts: 18
Joined: Sun Jun 18, 2017 4:00 pm

Re: PET - Help

Postby Dev_1 » Wed May 15, 2019 7:05 pm

Hello,

If someone can kindly provide their thoughts i would be most grateful, this has been playing on my mind and driving me crazy.

I really do appreciate any thoughts on this.

kind regards

maths
Posts: 7580
Joined: Wed Aug 06, 2008 3:25 pm

Re: PET - Help

Postby maths » Thu May 16, 2019 3:29 pm

If in 2010 your mother added your name to the legal title and you at that time also acquired a beneficial interest in the property (which absent other evidence you would have) and you each shared the subsequent expenses associated with the property (50/50) [in particular you never paid more than 50% of them] then even though mother continues to live in the property no reservation of benefit arose (ie on her death she would only include 50% of the property in her estate).

You then bought a house and mother moved in with you with her and your former home being let out.

When mother transferred 50% of her home to you this constituted a PET and a potential IHT liability may arise on your part only if mother dies within 7 years ofd this transfer (even if she dies in this period her nil rate band of £325,000 may mean no actual IHT charge arises on her gift to you).

Dev_1
Posts: 18
Joined: Sun Jun 18, 2017 4:00 pm

Re: PET - Help

Postby Dev_1 » Thu May 16, 2019 3:58 pm

Hello,

Firstly thank you very much for finding the time to reply I can’t express how grateful I am.

Can I just clarify when you said

“You then bought a house and mother moved in with you with her and your former home being let out.”

In reply to my question initially does it not matter how long we both remained at the former house together?. We only lived there for 5 years & 6 months after my name was added to the legal title we both moved out together to my new house.

Having looked at the following which is on the .gov website am I right in thinking that the this only applies if the “whole” house is gifted and mother continues to live there then she must pay full market rent & must stay there for at least 7 years.

However because in my situation only part of the house was gifted, no rent due from either party as long as we both equally share the running costs, and in this instance it doesn’t matter how long the property is occupied then after I.e doesn’t have to be 7 years after transfer?.

.gov.uk website
Giving away a home before you die
There’s normally no Inheritance Tax to pay if you move out and live for another 7 years.

If you want to continue living in your property after giving it away, you’ll need to:
* pay rent to the new owner at the going rate (for similar local rental properties)
* pay your share of the bills
* live there for at least 7 years

You do not have to pay rent to the new owners if both the following apply:
* you only give away part of your property
* the new owners also live at the property

Once again that you very much for your fine.

Kind regards

maths
Posts: 7580
Joined: Wed Aug 06, 2008 3:25 pm

Re: PET - Help

Postby maths » Thu May 16, 2019 4:17 pm

In reply to my question initially does it not matter how long we both remained at the former house together?.


No it does not matter.
Having looked at the following which is on the .gov website am I right in thinking that the this only applies if the “whole” house is gifted and mother continues to live there then she must pay full market rent & must stay there for at least 7 years.
Gift of whole house and mother still lives in it then the gift is a gift with reservation. It remains in her estate for IHT. To avoid this she must pay market rent. 7 year's is irrelevant.
However because in my situation only part of the house was gifted, no rent due from either party as long as we both equally share the running costs, and in this instance it doesn’t matter how long the property is occupied then after I.e doesn’t have to be 7 years after transfer?.
Correct.


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