Family buying your house

[Deleted member 66701]

No-one who’s likely to have something to leave to their to their family agrees with IHT.

I do. It (or tries to) prevent the concentration of wealth, which is a principle I wholeheartedly agree with.

 

[Deleted member 66701]

I was rather under the impression that there was a limit on "gifts", both in terms of value (£3,000 pa) and timing (7 years)? Otherwise why would anyone's Estate ever be subject to Inheritance Tax?

Unfortunately, all this is just a question of curiosity

Yes, that was my point.

 

[Mercenary Keyboard Warrior]

Those two posts seem to make more sense. The 30% figure just seems to be a number plucked from the air, based on what the HMRC would (probably) not notice.

One further question - For what (type of) tax are you still liable (at the market value) in this (intra family undervalue) situation?

I believe capital gains would be HMRCs angle

 

[Destination]

No, because you're effectively "gifting" the remaining 170k value of the house without paying the associated inheritance tax etc. It's a tax dodge and quite rightly dealt with as such my HMRC.

This is utter twaddle, you can gift whatever you like, as much as you like to a dependant, as long as you live for seven years after the gift.
If you don't then inheritance tax comes into it, but otherwise it doesn't, and in the case of a house sale, if 170k was a gift, this is below the threshold so there is no tax to be paid upon it at all.

Stamp duty is another matter.
As is if the mother continues to live within the property, rent free, after selling/gifting the property to a child.
If she isn't living there, then no problem.

 

[dowie]

What would be the steps in doing this be? Legal things to look out for? expected taxes and ways of trying to reduce them legally? Official people to get involved and perhaps financial advisors?

Depending on the value of the home AFAIK the main tax you can reduce/avoid when gifting or flogging a home to a relative is stamp duty. If you gift a home then stamp duty doesn't apply (except for any portion of the equity covered by a mortgage). If you heavily discount a home (as there is perhaps some leeway in terms of the valuation) then you're essentially just gifting the discounted portion and again stamp duty doesn't apply. If they're a first time buyer then they have a bit of extra leeway with regards to stamp duty anyway.

IHT is potentially an issue (depending on the value of the home) if you were to die in the next 7 years (IIRC) this does taper off through that time period too.

So my mum couldn’t sell her £400k house to my brother for £230k? That’s just wrong. You should be able to sell your property to who you like, for what you like.

Nah she can and he would get to avoid stamp duty. IHT potentially does apply though but that depends on the value of her entire estate, like if she were to pass with only a small amount in savings/investments (assuming she perhaps spent the proceeds of the sale on nursing home costs say) + that house as her main asset then (AFAIK) he'd avoid IHT too since he's essentially inherited £170k + whatever savings/investments she had... i.e. below the threshold. Also don't forget that if your father is out of the picture and previously left his estate to her as his spouse then his allowance can be used too.

I believe capital gains would be HMRCs angle

Assuming they don't already own a home and it will be their primary residence isn't it exempt?

If they're already home owners and it is a second home then I guess maybe, but otherwise I don't think that is an angle.

 

[CraigN]

edit: replied to wrong thread