Property Inheritance & gift with reservation

[hjay1107]

Father had 2 homes under his name - one of which he lives in and the other he rents out as his sole income as an elderly person which pays for his family living cost.
He has 2 daughters - both of which live with him.
Under poor advice, he transferred a house into each of their names.

The rental property is now vacant and he is seeking to get tenants in as the family rely on this income.

The issue is, his daughter works, and will foot a hefty tax bill should it be in her name. Rental income coming to him would be a gift with reservation which would mean it is treated as part of his estate in the event of his death.

Both of the properties are worth circa £1m each.

What are the options to structure this best from a tax perspective?

the father and mother are both alive , not legally married.

[maxime44]

This is one of those situations where the structure kind of works against you on multiple fronts.

If he’s still benefiting from the properties, HMRC will likely treat it as a gift with reservation anyway, so the IHT benefit of gifting is basically lost.

At the same time, the rental income sitting with the daughter means she’s the one taxed on it, even though your father depends on it. So you’ve shifted the tax burden without really shifting the benefit.

There’s no easy fix here. Undoing the transfers can trigger taxes, leaving things as-is is inefficient, and trying to move money around informally can create more issues.

Given the values involved, this really needs proper professional advice. It’s the kind of situation where small structural changes can have big tax consequences.

[pawncob]

"Under poor advice, he transferred a house into each of their names."

Has he transferred a house to each daughter, has he transferred a half share in each house to both daughters, or has he only transferred one house to both of them? If so which one?

If the former, he's lost the benefit of PPRR on his residence as well as the IHT relief which was available on his death.

Was the CGT dealt with on the transfers?

Will his widow occupy a house on his death? What arrangements have been made in his will?

Too many unanswered questions, so take professional advice ASAP.