A friend asked me this today as we did something similar with some land a number of years ago and I don't know the answer! Simply his father wants to sign a property over to his son, so son can get a mortgage to start a new business ! The mortgage will be roughly a 1/4 of the value of the property, what are the tax implications of this ? IHT ? Capital gains ? Just interested really! He was going to speak to his accountant tomorrow
Tax implications of signing over a house
- Thread starter Landrover
- Start date
No implications if he lives 7 years
Not sure it's same if it's owned in limited company ?
Exfarmer
Member
- Location
- Bury St Edmunds
Stamp duty. May be CGT but I think in some cases that can be deferred but they really should take some professional advice.
Heard recently of some one who is looking at a huge tax hit through not getting proper advice. Cant say too much.
Heard recently of some one who is looking at a huge tax hit through not getting proper advice. Cant say too much.
Goweresque
Member
- Location
- North Wilts
Transferring property for free is the same for CGT purposes as if you'd sold it for the market price. If its a business asset (such a farmland, or a shop etc) then holdover relief applies and no tax is due at the point of gift, but if its a non business asset such as a house then the donor will have a CGT bill based on the difference between whatever price he paid for it, and the market price at point of gift.
It can be done in stages so as to best utilise the CGT allowance, and ideally it should be done by two people at once - transfers between spouses are tax free, so if person A owns 100% of the house it would make sense for them to transfer 50% to their spouse, and both then make transfers to the eventual recipient each year utilising their CGT allowance. It will still take some time by this method however as effectively a couple gets £24k of gain free each year so you have to transfer a % of the house each tax year so as to realise that amount of gain. A lot depends on how much gain there is - if its been owned since the year dot it could take ages, if its not that big it could be done in a couple of transfers either side of the tax year end/start date.
It can be done in stages so as to best utilise the CGT allowance, and ideally it should be done by two people at once - transfers between spouses are tax free, so if person A owns 100% of the house it would make sense for them to transfer 50% to their spouse, and both then make transfers to the eventual recipient each year utilising their CGT allowance. It will still take some time by this method however as effectively a couple gets £24k of gain free each year so you have to transfer a % of the house each tax year so as to realise that amount of gain. A lot depends on how much gain there is - if its been owned since the year dot it could take ages, if its not that big it could be done in a couple of transfers either side of the tax year end/start date.
Exfarmer
Member
- Location
- Bury St Edmunds
Beware of gifts with reservations! Take advice.
Goweresque
Member
- Location
- North Wilts
Assuming no other gifts have been made and the house was not a mansion, it would be covered by the donors IHT allowance of 325k each. As long as the house was not being lived in by the donors, and any rent that was being collected was paid to the owners in the correct proportions then there should be no reserved benefits.
- Location
- Cirencester
As an aside to the OP's post, what would be payable if I was to transfer a privately owned house to a limited company and took a house out of the Limited company and signed it over to me. So in effect a house swap between the limited company and myself. Houses would be similar value. I assume it would just be stamp duty???
Currently live in a Ltd Co owned house but becoming a director so will be charged a "benefit in kind" which would be quite a chunky payment each year in tax.
Currently live in a Ltd Co owned house but becoming a director so will be charged a "benefit in kind" which would be quite a chunky payment each year in tax.
Goweresque
Member
- Location
- North Wilts
I suspect the transfer to the Ltd Co would still count as a sale for CGT purposes. And there is no rollover relief for domestic property, so the fact they then transfer another house to you is not relevant to the disposal.
Imagine you sold your house for cash, and then went and bought another. You'd have to pay CGT on the sale, and pay for the new one out of what was left. So what you're proposing looks pretty much the same from the tax man's perspective - the sale of a house followed by the purchase of one (or being the beneficiary of a gift). I think in your scenario both parties would end up paying CGT, you and the Ltd Co (though the company would be paying corporation tax on the gain, the effect is pretty similar).
Exfarmer
Member
- Location
- Bury St Edmunds
If you live in a tied house as part of your job you may be entitled to releif on the CGT on the property you own . The company will not be entitled to any relief on its sale. Take care and get some proper advice