My husband and I bought a house specifically for our daughter to live in 12 years ago because she was expecting a baby. We paid a deposit of £50,000 and have a mortgage for the balance of £150,000. Our daughter paid all the monthly mortgage amounts and has spent approximately £50,000 on a loft extension and renovations. We are about to retire and would like our deposit back from her and transfer the house into her name. How can we prove that she has the beneficial interest to HMRC, such that if we transfer it into her name we do not pay a huge amount of capital gains tax?. There is still £80,000 outstanding on the mortgage (eight years remaining) but we could possibly borrow this to redeem it on the understanding she would re-mortgage the house, once it was in her name, and repay us. The house is currently worth approximately £450,000.
Arthur Weller replies:
If you look at HMRC’s guidance in the Capital Gains manual (at www.gov.uk/hmrc-internal-manuals/capital-gains-manual/cg70230
, second bullet point) you can see that you may have an argument to say that the house has always been beneficially owned by your daughter, even though it was not originally put into writing. Furthermore, if you look at CG65406
you can see that if you put things into writing now it would help (although there are other contrary indications on the HMRC manuals). If so, merely transferring the legal ownership now to your daughter will not involve any CGT (see CG10720
This question was first printed in Property Tax Insider in December 2018.