My father wishes to sell his flat. He has offered it to me(daughter) at a discounted price gifting £40,000 as deposit. Is this liable to tax

Asked by grantde

3 Answers

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Answered by Paul Richardson, IFA in Wotton under Edge, GLOUCESTERSHIRE
this is known as a PET potentially exempt transfer - and could be subject to inheritance tax depending on your father circumstances | 04.06.12 @ 19:02
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$commenter.renderDisplayableName() — {comment} | 08.20.17 @ 11:52
Answered by Darren Smith, IFA in Basingstoke, HAMPSHIRE
another point to consider (if you need a mortgage on the property) is that most lenders would insist on insolvency indemnity insurance on this transaction as its being sold on below the current market value as this could be seen by an insolvency investigation as an attempt to deprive an estate of assets. courts have been known to overturn sales in this instance and reinstate the asset to its former ownership status but NOT reimburse the "new" owner. hence the need for III. | 04.08.12 @ 10:48
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$commenter.renderDisplayableName() — {comment} | 08.20.17 @ 11:52
Answered by John Stirling, IFA in Saffron Walden, ESSEX
It could be.

The considerations are;

Does he live in it, and will he continue to do so? If so then it will remain part of his estate for inheritance tax purposes unless he pays a full market rent to you, and the paperwork is pretty robust - he would also need to live for 7 years from the date of the gift. Any element of gift (discount) or reservation (living there on not entirely commercial terms) would cause a problem.

On top of this, unless you live in the property as your primary residence it may also be subject to capital gains tax when you sell, and if your father lives there and pays you a rent the rent will be subject to income tax.

Finally, if he doesn't live there then he may be subject to capital gains tax on the profit he has made during ownership at the full market value rather than the discounted sale price.

As you can see it's a pretty complex picture, and you probably need specific advice on this to avoid the pitfalls. The most common scenario would be doing this to avoid either capital gains tax for your father (it doesn't) or inheritance tax (it may not).

Feel free to enquire further.

www.acwealthmanagement.co.uk | 04.10.12 @ 11:09
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$commenter.renderDisplayableName() — {comment} | 08.20.17 @ 11:52
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Answered by

Paul Richardson
Paul Richardson, IFA in Wotton under Edge, GLOUCESTERSHIRE

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