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transferred property ownership to children

ckm4328 thank you for your answer. We have no further interest in the property as our plans are to move abroad. Our objective is to transfer the property deed on to our son before moving. And yes, we would do not want him to end up paying taxes. I do not think that a gift is suitable in this case. What would you think would be the best way to achieve this objective. A recent Estate agent valuation of the flat was approximately 300K. Any advice will be much appreciated. Sol01


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We had previously assumed that you were continuing to live in it. This is not the case, so advice will change. If he is going to live in it, then transfer it to him before you go abroad and IHT will disappear over the next 7 years. There will be no Capital Gains Tax involved as it has been and will be the owners' home. If he is going to rent it out, I would normally say transfer it a year later so that the CGT aspect for him starts at a later date but, with the market still falling, it would be better to transfer it as soon as possible so that CGT can start from a higher base. There will still be the IHT consideration for 7 years. Have you got the valuation in writing? If not, please do so. If you are gifting it to your son then you should be able to do it without a solicitor. Get forms from the Land Registry.

If the property is your principle private residence then you are entitled to capital gains tax relief on the disposal of it. If it is an investment property that you are intending to transfer you would be obliged to pay capital gains tax on any gain. A gift to your children would have IHT consequences in that it will be classed as a Potentially Exempt Transfer. If you die within seven years of making the gift there will be a reduction in the value of the nil rate band available at the time of your death. If you want to transfer the property to your children at full market value they will be liable to pay Stamp Duty Land Tax at the rate of 3% Assuming they do not have £300k or would struggle at this time to obtain a mortgage you could still transfer the property to them and have a legal charge over the property which you can removed at any time after the repayments have been made. A solicitors reasonable fees would amount to around £350 +VAT for dealing with the transfer and a further £350 +VAT for drafting a suitable legal charge. Your children may wish to instruct their own solicitor to advise them but this is not always necessary.

Many thanks for helping me to find a way out of the Maze. Why is it not possible to make a gift without any strings attached? Of course, I know why ... but it is just a momentary frustration ... sorry. I have another question to ask:- Cannot you sell the property to your children or to any other close relative under the market value or for a nominal price? After all, it is your own asset and your decision. Once again thanks.

You can sell the property at whatever price you wish. The price paid will incur SDLT if over £175k and just to be on the safe side you should make a Declaration of Solvency confirming that making the gift will not make you insolvent - this will prevent a trustee in bankruptcy looking to recover the difference between the gift price and market value from your relative IF you were to become bankrupct in the next 5 years - not a happy thought but it will save a great deal of expense to make the simple declaration now on making the gift.

The above advice is good but if you sell at an undervalue then the Revenue will treat the amount of the undervalue as a Potentially Exempt Transfer for IHT purposes. In addition if you retain a charge over the property the amount of that charge will still form part of your estate for IHT purposes until you surrender it and only at that time will your seven years begin to run. My immediate impression is that an outright gift may be a good bet if you can afford it. If you don't survive four years you are no worse off and from then on it is less IHT. It is not that it is not possible to make gifts without strings attached it is just that the revenue wants a piece of the action. Just in case you are not aware for IHT purposes you have a Nil Rate Band of £312,000 due to go up in April and if your spouse has died or you are married there is a further transferable Nil Rate Band of £312,000. Therefore IHT is only payable if on death your assets exceed £312,000 or £624,000 if married. Potentially exempt transfers that fail are added to that figure. so if you give your flat away and it is your only asset and you die in a year there would be no tax to pay. You mention you are going abroad if you acquire a domicile of choice in another jurisdiction the revenue will only tax you on your assets in the UK and you will still get your Nil-rate band.