ChatterBank1 min ago
Tax implications
5 Answers
Last year in order to help our son on the property ladder my husband sold a house we owned to our son. As he could not raise the full morgage on his wage my husband through a solicitor split the property 80 20 my son owning the bigger portion. He has recently raised the full amount and paid my husband the 20% he owed him ( we are just waiting for the morgage lender to take my husbands name off the house) We did not make any money on the property and we sold it for the price we paid for it. As my son is in the RAF he rents the house out all declared with the inland rev. But does anyone know how my husband stands with the tax on this one.
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I don't follow this. Are you saying:
Your husband had a spare property. He let his son buy a 20% share based on the price your husband had paid for it. Now your husband is removing his name from the property. The intention is that the house will belong solely to your son. Your son rents it out.
If so, you in effect sold it to your son at well below market value. Was that the purpose of this complex arrangement?
Are you asking whether there are any Capital Gains Tax implications?
Your husband had a spare property. He let his son buy a 20% share based on the price your husband had paid for it. Now your husband is removing his name from the property. The intention is that the house will belong solely to your son. Your son rents it out.
If so, you in effect sold it to your son at well below market value. Was that the purpose of this complex arrangement?
Are you asking whether there are any Capital Gains Tax implications?
Yes he did, he would have bought the house out right but could not afford the whole morgage. But he now has the capital to take on the whole amount so has paid back the 20% he owed his Father. The house is now his. He rents the property out and the rent basically pays the morgage. He does his own tax returns and everything is ok there. But we were wondering the fact that my husband had his name on the morgage for six months does this effect our tax return do we declare it even tho we made no profit on the propery. Hope this is understandable Thanks again
There are two areas of income that you might have received, and that therefore may need to be declared: -
1) Any interest paid to your husband by the son on the 20% loan (maybe you didn't charge him any - that's OK). If you did take interest from him, it goes in the same boxes in the tax return as Building Society / Bank Interest received.
2) Any capital gain made on the property. It isn't just sufficient to say to HMRC 'we loaned our son �20k and took a stake in the property - now he has paid the �20k back and our name has come off the title register'. HMRC will want to know that that the property has not increased in value between the time you bought it and now. The way to do that properly is to have it valued now (unless your son has just sold it? - but it sounds like he hasn't). If the property was worth �100K when your son bought it, and it is worth �110k now, then you have made a 10% capital appreciation of whatever stake you provided him at the time.
There is a capital gains annual allowance before CGT is payable, and unless the numbers are large it is unlikely that CGT is due - particularly as in many parts of the country, property prices have fallen recently. CGT is payable at 18% of the net gain, I believe.
1) Any interest paid to your husband by the son on the 20% loan (maybe you didn't charge him any - that's OK). If you did take interest from him, it goes in the same boxes in the tax return as Building Society / Bank Interest received.
2) Any capital gain made on the property. It isn't just sufficient to say to HMRC 'we loaned our son �20k and took a stake in the property - now he has paid the �20k back and our name has come off the title register'. HMRC will want to know that that the property has not increased in value between the time you bought it and now. The way to do that properly is to have it valued now (unless your son has just sold it? - but it sounds like he hasn't). If the property was worth �100K when your son bought it, and it is worth �110k now, then you have made a 10% capital appreciation of whatever stake you provided him at the time.
There is a capital gains annual allowance before CGT is payable, and unless the numbers are large it is unlikely that CGT is due - particularly as in many parts of the country, property prices have fallen recently. CGT is payable at 18% of the net gain, I believe.
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