cookstar

iTrader: (6)

My Dad is soon going to be handing over a house to my Brother and I, now instead of selling it, I want to buy my Brother out, and mortgage the remaining 50% on a BTL basis.

Would I just tell the mortgage company I have given 50% of the value straight over to the vendor (my Dad) in cash and they will lend the remaining 50%?

So then he can just give the cash released from the mortgage to my Brother.

Another question, will there be any tax payable for the sale if it is done this way, my dad owns another property as well, not sure if this makes any difference.

Account deleted by request

Bit of a complicated one. I would have said the easiest way to avoid paying any tax would be for you to buy the house off your dad for 50% of the value. ie if 100k then buy for 50k. Then when your dad gets the 50k he gives it to your brother.

I wouldn't tell a sole you are buying the property for 50% of its value or the relationship with your dad. If the surveyor thinks it is cheap you can just say you have agreed that deal for a quick purchase etc due to market conditions. It is difficult to prove you are getting a discount as the market is hardly booming.

Your dad hands over the cash to your brother and so long as he isn't slef employed then IR will never know. If your dad was to sell his other property within 1 - 2 years he could be liable for CGT on that as a seond home. To avboid CGT on this property he can just say he has been living in it even if been rented out or similar.

Chop

disclaimer: I'm sure I will get shot down for this but if you do by the rule book then you WILL pay a load of tax. This would be my way of getting round it and is merely friendly advice.

cookstar

iTrader: (6)

I had thought of that, but the mortgage company are surely going to want to see 20% of that £50k (example) being put down.

Devildog

Cookstar.

You should take advice form an inheritance planning firm on this. That's what Tiggs does, although he's not posted on here for a while as far as I know.

Not quite sure what you mean, but If your dad is giving you the house for nothing, ie a gift, or less than market value then I don't believe he will have any tax implications. You and your brother will, however.

If you buy your brother out straight away, he will have a capital gain on whatever you pay him less what he has paid your dad in the first place, which will be taxable at the current CGT rate.

You will have the gain when you sell, less any allowances and indexation at the time.

All you need to tell the mortgage company is that you and your brother own the house, there is no current mortgage and you require to borrow X against it to buy out your brother's interest.

EddScott

I don't think this is right. You can't just hand over a house or sell a house to a relative for less than market value (not at arms length) without any implications.

Say for instance dad sell house to son for 80% of value of house.
Father dies, his estate is less 20% of the true market value of the house. I believe that fair market value would be used to calculate the estate and not the actual amount paid (if not fair value)

You can do a deed of gift via a solicitor to hand the property from one brother to the other, mortgage 50% of the house and give him the money.

Would father handing over the property be a gift that comes under the 7 year rule - I don't know but probably. There may also be CGT to be paid but I'm not sure who would be liable.

cookstar

iTrader: (6)

Tricky one isn't it?

Devildog

Edd,

Absolutely - but I'm going on the basis that Cookstar's dad stays alive for a while

There would be no immediate tax implications for his dad.

If he dies there would be inheritance tax issues for the estate, of course, hence advising specialist advice is sought.

EddScott

Don't ask me, I failed Personal tax in October and having to retake this April!

austinwrx

IR will find out.

did my parents some yrs ago for buying & selling of houses.

and that was pre-internet days when info was hard to find out.

Luan Pra bang

You have to get the house gifted as a love and affection transfer. After that remortgage to buy your brothers share. To do this you have to get your dads bank to remove title temporarily which some banks will do subject to an insurance policy to cover the debt untill dads mortage is repayed. Its a pain but doable with the correct legal advice.

richardg

there will also be an SDLT liability.

stamp duty land tax will be payable on the notional value of the transaction. what the "value" is, is another matter - speak to local agents and bear in mind that as you intend to acquire the current interests of two parties, you may incur two sets of SFLT as these will be "linked transactions"

speak to a conveyancer or solicitor as well as a tax planner - or one person all neatly rolled into one if you can find them

Milamber

iTrader: (2)

scoobysmiff

iTrader: (2)

can you not get your dad to sell you the house for £1, you then get a mortgage for 50% of the value and give the cash to your brother as a once only gift cos you llike him?

MrJim

i sold a house for half price to my daughter and had to go to solicitor to swear and sign that,(1)i wasn,t going broke and trying to shift my assets (2)that it wasn,t for tax evasion.

PaulC72

Don't know what to advise Cookster but it certainly is an interesting one

Hope you get it sorted and please post the answer

richardg

indeed

Account deleted by request

But say in your intial post that your are going to do a BTL on the 50% anyway. So you would probably have to put down 20%. So you agree to purchase off your dad, do the processes of a property transaction, get a mortgage for 40k and put your 20% 10k deposit down, the mortgage company will then release funds for payment to you dad of 50k. He hands over to your brother.

Chop

EddScott

Yes but had you died the full value of the house would be taken into account to calculate your estate.

You can't flog a house for a £1. Your effectively duffing up the tax man and that isn't allowed.

richardg

that's why sdlt applies to the value of the property being transacted and not the consideration (ie the money involved)