Legality/Tax position when "giving" someone a house

[freddies_dad]

Hello,

Is it possible to give someone (non-family/non-related) a house? Are there any tax implications on either side etc?

Serious question!

Thanks,
Phil

[sleep envy]

your so kind but I'd rather accept a few pints in return

[sleep envy]

ps - I looked into this in the past and found the answer to be no

HM C&E know what you are up to

[NorthernBoy]

freddies_dad said:

Hello,

Is it possible to give someone (non-family/non-related) a house? Are there any tax implications on either side etc?

Serious question!

Thanks,
Phil

It is genuinely a serious question? You ae giving it away, and not inending ever to be given it back, or to receive rent, or anything in kind?

[Eric Mc]

Of course you can give a house away. The law can't stop people making gifts.
However, tax law doesn't like it when an asset is "given" away but then the giver seems to have the same useage of the asset after the gift has been made. In other words, the gift has been made with "reservation of title". If this is what has happened, the "gift" will be deemed to have not taken place or the the person who made the gift but seems to retain use of the gift could be subject to an Income Tax charge on the useage of the gift.

Also, if the individual who made the gift dies within seven years of making the gift, the value of the gift is included in the estate of the deceased when working out the total value of his/her estate for Inheritance Tax purposes.

[scotal]

What would happen with stamp duty, would that not be levied if the owner changes??
(fairly small beer compared to being given a house)

[freddies_dad]

Eric Mc said:

Of course you can give a house away. The law can't stop people making gifts.
However, tax law doesn't like it when an asset is "given" away but then the giver seems to have the same useage of the asset after the gift has been made. In other words, the gift has been made with "reservation of title". If this is what has happened, the "gift" will be deemed to have not taken place or the the person who made the gift but seems to retain use of the gift could be subject to an Income Tax charge on the useage of the gift.

Also, if the individual who made the gift dies within seven years of making the gift, the value of the gift is included in the estate of the deceased when working out the total value of his/her estate for Inheritance Tax purposes.

The house would literally be given away... the owners move out and the gift-ee can do what they like with the house.

[Eric Mc]

If that is the case, then the tax man has no real say in the amtter, unless you die within seven years.

I'm not sure of the Stamp Duty position - there might be some due based on the market value of the property on the date of the transfer.

[Piglet]

I'd need to check whether there is a stamp duty issue, my feeling is not if there is no value BUT there may well be a get out of that buried in SDLT regs.

The person receiving the property will ultimately be liable for CGT based on the difference between what they paid for it (nothing) and the real market value - charged (still I think?) when they come to sell.

If the person giving away the property is doing so to avoid care fees I think the Local Authority who will otherwise end up funding have the ability to be difficult.

Ditto if it's to avoid losing the asset through bankruptcy etc. it can be unpicked.

As Eric says, if the person give it dies within 7 years it forms part of their estate for inheritance tax purposes. You can insure against this though I believe.

As an aside, you mentione not related & not family, this doesn't make any difference to most scenarios AFAIK.

[Eric Mc]

The only member of a family where tax exemptions (CGT and IHT) come into effect are where the property transfers are between married couples or couples in a Civil Partnership.

If the person receiving the propery uses it as their main residence, it should escape CGT when it is eventually sold by them.

[Piglet]

Eric Mc said:

If the person receiving the propery uses it as their main residence, it should escape CGT when it is eventually sold by them.

Even if they got it for nowt? Wouldn't it be chargeable based on the market value at the time they were given it (assuming non spouse)

[Welshbeef]

This is totally allowed - however if you die within 7 years then there will be tax due by the benefactor.

However this tax decreases year on year, I cannot recall the% at each year but it is not linear rather it starts pretty steep and tails off IIRC the last year is 10%. And when I say 10% it means that 10% of the valu is to be taxed @40% (currently) and changing to 18% Apr08.

[Eric Mc]

The Principal Private Residence is exempted from Capital Gains Tax. If the gain on disposal of the PPR is £50,000 or £300,000, it is still exempt.

If you paid nothing to acquire the property, obviously, all the proceeds on a subsequent disposal will be a "Capital Gain" - but if the property is your PPR, it will still be exempt.

[Welshbeef]

Your getting muddled here - yes PPR is totally capital gains tax free (currently) but if you are gifted the house & the giftor doesnt live more than 7 years it still counts as part of their estate and on a reducing balance each year.

[freddies_dad]

Really helpful chaps. Most appreciated.

It's a hair-brained idea at the moment but might have some merit. There are a million and one what-if's to handle before this idea becomes tenable.

Thanks again though!

[M400 NBL]

As Eric mc says, as long as the person giving the house away doesn't benefit from the gift and survives 7 years, there should be no problem..


Well not unless Alistaire Darling decides to make changes.

[Eric Mc]

Something he is apt to do - as he has just demonstrated with the biggest changes to CGT law in 40 years.

[JohnP68]

I suspect stamp duty may be due. Last year I "gave away" 50% of my house to my unmarried partner (and 50% of the mortgage!). Turned out we had to pay stamp duty on her share of the equity, which p***** me off no end! Thieving Labour scumbags....

[NorthernBoy]

freddies_dad said:

[The house would literally be given away... the owners move out and the gift-ee can do what they like with the house.

Why, if it is genuine, did you put the word "giving" in inverted commas?

It does rather imply that you are intending to not actually give up all rights to it.

[freddies_dad]

NorthernBoy said:

freddies_dad said:

[The house would literally be given away... the owners move out and the gift-ee can do what they like with the house.

Why, if it is genuine, did you put the word "giving" in inverted commas?

It does rather imply that you are intending to not actually give up all rights to it.

It was more to do with the fact that you can't physically give a house to someone (unless you are super strong or something) - I apologise profusely for the misdirection. I shall self-flagellate as penance and beg for your mercy. :bowandscrape: