PPR and tax relief

[rc2011]

Hi, i would appreciate any advice on this matter.

My parent bought an apartment 7 years ago and transferred this into my name roughly 5 years ago at market value.

Im currently living at home and am thinking of buying my own place. This would involve me selling the appartent and taking some of the proceeds for a deposit with my parents pocketing the rest.

The apartment is currently rented out and I have never lived there;

Can i claim PPR on this apartment to reduce my tax burden?
How long do i need to live there for to claim PPR?

If the value of the proeprty has only gone up £10,000 wil there be any point in claiming PPR or is it more hassle than its worth. what would my tax advantage be?

What proif is needed to show i have lived there? and who do i need to show this to?

any help on this would be great.

thanks in advance

[TaxationPete]

You have never lived there so it can not be your PPR. You would have to move in Lock, Stock, and Barrel for some considerable time to pull the wool over HMRC's eyes. When your parents transfered the property at OMV did they pay CGT on their gain or did they live there for the 4 yeras they owned it. ? Regards Peter

[rc2011]

if i move in for one month and realise its to small to live can i not claim PPR for the last 3 years of ownership?

no CGT was paid when it was transfered to me and they did not live in it. It has been rented out the majority of the 7 years it has been owned.

If i didnt claim PPR how much tax would i have to pay. assuming the aprtment is now worth £115k and was transfered to me for £105k - gain £10k. would i get any taper relief etv?

thanks

[TaxationPete]

Nine months may do it if you own no other main residence and do not return to a previous address. Your parents should have paid CGT on the transfer OMV. HMRC may catch up with them. If you only made £10,000 after sales and legal fees, which are deductible then you would not have used all your CG Allowance of £10,100 to there would be no CGT liability. Regards Peter

[Telometer]

"my parents pocketing the rest"

Whilst your name is on the deeds, it suggests to me that your parents possibly never actually gave it to you. In which case it quite possibly belongs to them, for CGT purposes (or at least a proportion of it does).

[TaxationPete]

Telemeter has a very good point. Who actually receives and declares the rental income. Regards Peter

[rc2011]

thanks for your info. just to clarify a few points.

the property is in my name solely, and was transferred at market value 4 years. my parents did pay CGT when it was transferred to me. since i have taken ownership of the property it has only increase in value by about £12k max.

I was wondering as the capital gain is only around £12k and i can take legal/solicitor bills etc off when i sell. Is there any point in claiming PPR, what is my tax bill likely to be? i have no losses to carry forward or capital gians to claim.

The rent over the last few years covers the mortgage only with none left over.

Peter (above) you have said that I will not have used all of my CGT allowance. does this mean if i sell the apartment at anytime, i will not have a tax bill to pay and i can use all proceeds to purchase a house?

[TaxationPete]

If the gain, after expenses, is less than your CGA then there would be No CGT liability. It would appear from what you have said, that your parents want a slice of the cake so all the proceeds would not be available to you. Is there some form of agreement about this slice of cake. You may find that although you may be the legal owner, they may be beneficial owners. Who receives the rental income you or your parents. Regards Peter

[rc2011]

Pete, there is no formal agreement that i have with my parents, however as they are helping me buy my first house, i have agreed that i will take a & and so will my parents (to pay off their mortgage). i am aware they have no legal rights to take any of it.
the rental income comes straight to me and i give to my parents as a sort of pension.
i am the beneficial owner and landlord and have been for the last 4 1/2 years. no CGT was 'paid' by my parents as my dad have lossess he was able to offset against there gain, so im assuming there is no problems with this side of it.

the only thing i am worried about is that when i come to sell it that i may be missing out on a way to claim PPR. although from what has been said earlier, as my gain is lower than my CGT allowance it would not matter unless i have other gains etc which i dont.

So technically am i able to sell the apartment in 6 months, give my parents a share on the side and use the rest as a depsoit for a house with worrying about any other taxes being chagred to myself?

[jeffrey]

Pete, there is no formal agreement that i have with my parents, however as they are helping me buy my first house, i have agreed that i will take a & and so will my parents (to pay off their mortgage). i am aware they have no legal rights to take any of it.
But why did your solicitor not advise, at the outset, of the need for a Trust Deed?

[rc2011]

jeffrey, i was gifted the property, therefore no need to have a trust deed. I am giving my parents some of he proceeds as kind of a thank you.

[TaxationPete]

How can you make a ppr claim you have never lived there. If you moved in for 3 months HMRC will not accept this as your main residence without a lot of questions. If you lived there for 12 months and genuinely made it your home with all bank account, DVLA, HMRC, electoral role etc.etc at that address then they most probably would accept your PPR claim, but pointless if you have a small gain. Regards Peter

[rc2011]

So technically am i able to sell the apartment in 6 months, give my parents a share on the side and use the rest as a deposit for a house with worrying about any other taxes being charged to myself? i wont need to claim PPR if my capital gain is less than £10k?

[TaxationPete]

Correct. You had better keep a record of all the monies transferred to your parents both from 'your' rental income and the 'on the side' pay back ans these payments will be treated as your estate if you get into an IHT calculation situation. This transfer was badly set up and I know exactly where Jeffrey is coming from. Regards Peter

[Telometer]

I'd be inclined to be rather more relaxed about it - and note that the tax consequences are none, and there were no solicitors fees either.