House Buying Scenario
Discussion
Not sure if this is in the right place, but it has tax implications, so wanted to get it under the right noses!
Can anyone advise on the following scenario?...
Couple X own a house (with mortgage) and wish to utilise a reasonably large lump of equity to move up on the property ladder.
Parents of one of Couple X live outside the UK (but still within the EU) and offer to 'invest' in the house purchase. i.e. Couple X put in £350k, Parents put in £100k with a view to making a profit after 2 to 3 years when the next property will be purchased.
Now assuming that if couple X go it alone they have a max purchase price of £350k, and therefore limited scope to increase the value of the new propoerty by developing it, whereas with the £100k from the parents they could buy a larger property with more scope and also afford to develop.
What are the implications if Couple X take out the larger mortgage (you can assume that there won't be lending issues), and simply receive a monthly lump from the parents to cover the increased monthly repayments?
I am guessing that any profit that the parents make on the property, due to them not living there, will be taxable, but in which country?
Can anyone think of a better way of basically allowing the parents to make this investment?
Thanks in advance
Can anyone advise on the following scenario?...
Couple X own a house (with mortgage) and wish to utilise a reasonably large lump of equity to move up on the property ladder.
Parents of one of Couple X live outside the UK (but still within the EU) and offer to 'invest' in the house purchase. i.e. Couple X put in £350k, Parents put in £100k with a view to making a profit after 2 to 3 years when the next property will be purchased.
Now assuming that if couple X go it alone they have a max purchase price of £350k, and therefore limited scope to increase the value of the new propoerty by developing it, whereas with the £100k from the parents they could buy a larger property with more scope and also afford to develop.
What are the implications if Couple X take out the larger mortgage (you can assume that there won't be lending issues), and simply receive a monthly lump from the parents to cover the increased monthly repayments?
I am guessing that any profit that the parents make on the property, due to them not living there, will be taxable, but in which country?
Can anyone think of a better way of basically allowing the parents to make this investment?
Thanks in advance
Basically the Parents should pay tax on the profit they make in which ever country the are domicile for tax in. If that country does not levy a Capital Gains Tax then they are quids in.
However, it would be very difficult to prove that any tax is owing anywhere because the inland revenue would not get suspitious here is the UK as it would be the couples main residence.
Gifts are untaxible most of the time, so if the parents are gifting the £100k and then the kids are gifting a larger sum back a few years later, it should be ok.
I am not an accountant but the gift would also become a P.E.T under english tax law. 7 year rule applies for IHT.
This is all usual practice when everyone is in the UK and considering you are allowed about £8000 CGT allowance annually, if it was UK based the parents would need to make over £16,000 here before tax is payable anyway.
Depends on the allowances in their country.
IHT kicks in in Germany and France above £2m which is sensible so local knowledge is needed.
I hope this helps a bit.
Adrian
However, it would be very difficult to prove that any tax is owing anywhere because the inland revenue would not get suspitious here is the UK as it would be the couples main residence.
Gifts are untaxible most of the time, so if the parents are gifting the £100k and then the kids are gifting a larger sum back a few years later, it should be ok.
I am not an accountant but the gift would also become a P.E.T under english tax law. 7 year rule applies for IHT.
This is all usual practice when everyone is in the UK and considering you are allowed about £8000 CGT allowance annually, if it was UK based the parents would need to make over £16,000 here before tax is payable anyway.
Depends on the allowances in their country.
IHT kicks in in Germany and France above £2m which is sensible so local knowledge is needed.
I hope this helps a bit.
Adrian
Surely there's no reason why it couldnt just be a loan. If your partents loan you £100K (even if they loan it in monthly installments) and you pay it back at a later date then no tax is due.
The profit on YOUR house is exempt from CGT as its your principal residence.
If you want to give your parents a gift at a later date thats entirely your business!
The profit on YOUR house is exempt from CGT as its your principal residence.
If you want to give your parents a gift at a later date thats entirely your business!
what SMartie said.....assuming parents and kiddie are in mutual trust arrangement...and don't feel the need to put the actual deal in writing, then it's all irelevant. Unelss you're retarded and go out of your way to alert the IR this will never, ever get picked up....and there's certainly nothing remotely dodgy about it until the CGT issue comes up at some random point x in the future....
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