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Advice wanted ;Selling a house

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About 7 years ago my mother in law decided to move closer to us after her husband had died some 5 years earlier, She was too old to get a mortgage so my wife and I took out a mortgage for 17000 which was the difference required between selling her old house and the cost of the new one (55,000). She paid us each month for the amount the mortgage was and it went straight out of my account each month no problem, last year I had some spare cash so I cleared her mortgage completely for her so she could retire and not have to work to pay us her mortgage, so we cleared everything and the deeds duly turned up in my wife and my names. Now here is the problem, the mother in law has decided that now she has retired that she is bored, got no friends and wants to move back to where she comes from. The problem I have is if we sell the house which is our joint names can we just give her the money? do we have to pay capital gains tax or would it be easier to transfer the deeds back into her name and let her get on with it? What started out as doing a good deed has become a nightmare of how to give it back. Any advice or pointers would be appreciated.



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AIUI, and you will need to check this with a good tax accountant.


Your MIL and you own the house in direct proportion to the amount of money you put into the purchase. The possession of the deeds is immaterial to this - they were simply security for the mortgage.


When the house is sold, your MIL will be free of any capital gain as the house is her main residence. You will be liable for CGT on your proportion. You can mitigate this by gifting irrevocably one half of your share to your wife - a simple letter will do. This splits the capital gain equally between you and allows you 2 lots of individual tax allowance (currently £ 8,800). You may also find that you can each gift your MIL £ £,500 worth of house share for this tax year to alter the proportional ownership and thus your capital gain. Be aware that you will both need to live for a further 7 years after making this gift. Had you planned properly from the first, you could each have made such a gift in every tax year.


You will need to consult an accountant on at least 2 items


1) whether you qualify for taper relief, and

2) whether, in your situation, you may be better off waiting for the CGT changes due in April (ie flat rate 18% and no taper relief; plus an increase in personal allowance to £ 9,200)


Finally, you should enquire of an accountant as to whether it could be held that by paying you for the mortgage, your MIL has, in fact being buying your share of the house from you and that you would only be liable for the proportion of the gain where you have paid outright (ie the final lump sum payment of the mortgage)

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Definately need an accountant to get this one right.


It appears the deeds do not contain MIL's name even though she paid bulk of the house (deposit & repaying part to yoursleves). Under ToLATA your MIL would indeed prove her element of ownership, however, HMRC will assume it is yours/wifes as you are on the deeds.


You cannot escape by simply transferring the deeds to MIL as you will still have to complete a capital gains declaration. It may be that you can complete a Trust Declaration stating who owns what percentage (based on what paid) and HMRC will discount MIL's real share, leaving the capital lump sum you paid last year.


The capital lump sum you paid (based on house price rises over the last 7 years) going to give you a large return. You can gift half to your wife, so effectively increasing your capital gains to £18400 between you.


Under inheritance tax rules, you can each gift your MIL £3000 each for this year, and if you made no gifts last year then also £3000 each for last year. You may gift the entire proceeds to your MIL but if this is over £12000 (assuming gifting over last and this year) then the balance is subject to Inheritance Tax rules for the next 7 years (only a problem if your estate is going to be over I think £315,000).

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