My son is a property owner. A property was bought for £28,000 in the 1980s, and is now worth £110,000. What are the implications if I wish to add my son onto the title deeds of a rental property (as a third owner), owned by my wife and myself? A wider question is: we are currently living in a house in Lancashire, as custodians, owned by my son, and we would like to exchange our main dwelling which is currently rented out (value £200,000) and second property referred to above (value £110,000) with the house that we are currently living in (my son's property is valued at £340,000). What are the tax implications and what is our best course of action?
Arthur Weller replies:
I presume that your son will become a one-third owner of the property. If so, you and your wife are each transferring one-sixth of the house to him. The acquisition value of one-sixth of the house was £28,000/6, and the current value of one sixth of the house is £110,000/6. So, you and your wife are each making a capital gain on this transfer of £13,666. If you have the capital gains tax (CGT) annual exemption available (currently £11,300) the gain you will each have to pay tax on is about £2,366. If he does not pay you anything for receiving this one-third of the property, then he will not have to pay any stamp duty land tax (SDLT). On the wider question, if you do as you propose, this will trigger capital gains tax (CGT) and stamp duty land tax (SDLT) for both sides. There is not enough information given to say how much tax, and not enough space in this column to properly answer your question. You may be better off not doing the exchange.