Transfer from one name to two, to equalise tax liability

[StevieG]

Hi.

I'd be grateful for the forum members' advice concerning the following issue:

We have a family property worth £200K which we rent out. The deeds are solely in my name.

My brother is a basic rate tax payer, and I'm a higher rate tax payer.
I’d like to transfer 50% of the property to him so that the burden of taxation is shared between us, and to pay tax on profits at the basic rate.

Can anybody advise on how such a transfer should be arranged, if stamp-duty must be paid, and also if there are any pitfalls that we should be aware of?

Thanks in advance,

[TaxationPete]

If you transfer 1/2 to your brother then you will become laible for CGT on the gian made tetween acquisition and disposal of half the proprty minis 1/2 the lgal costs and you CG Allowance of £9,600. Regards Peter

[Telometer]

No SDLT (not Stamp Duty these days) liability if he buys half of it (£100k) or you give it to him.

But whatever the amount of cash he does or does not give you, you are treated as making a disposal to him at market value - so £100k. CGT calculation = (Market value) - 0.5 x (acquisition cost (or probate value when inherited) + enhancement costs (e.g. an extension) + legal costs on acquisition) + legal costs of disposal of half.

NB 1 you get 100% of legal costs relating to the gift.
NB 2 annual exempt amount £9,600 can be taken off gain provided you make no other disposals in the year.

It may make sense to transfer 25% in each of two years in order to avoid any taxable gain.

[King_Maker]

Also, for non-married co-owners, the income sharing ratio does not need to reflect the capital sharing ratio, if you so agree.

[StevieG]

Thanks for the advice guys

[jeffrey]

"Transfer of equity" is the popular misnomer for "Transfer subject to an existing mortgage [which is to continue existing despite the property ownership being transferred]". So, is the property currently mortgaged?
1. If it is, you would need consent from the mortgagee [lender] for any Transfer of legal ownership.
2. If it's not, your Transfer would be just a Transfer!