Capital gains tax?
 

Hi, il just get straight to the point. My mother is looking to purchase a house and i will renovate it and then buy the property off her after a year for the same price as she paid. I cannot currently get a mortgage as i am a student. Will my mother get clobbered with capital gains tax if she is not making a profit from the property and is selling it to her son?
Any info would be appreciated as the websites i have looked at are confusing with their wording.
Thanks

Re: Capital gains tax????
 

Have you checked the reg/rec? :rolleyes:

Re: Capital gains tax????
 

:winner:

You sure its got fuel? :lol:

Re: Capital gains tax????
 

Tyre pressures?

In principle the clue is in the name, "Capital GAINS Tax", if she's making no gain then there's no CGT. Even if she does make some gain there's the CGT allowance (not sure what it is now, £7-8k per tax year or thereabouts). Don't know if there are any rights or wrongs about selling to a relative at what is seen as possibly below market value, thinking Inheritance Tax aspects, but that's another issue.

Re: Capital gains tax????
 

yes it got posted in the wrong place. serious answers now please. anyone had any experience in this?

Re: Capital gains tax????
 

its my understanding that capital gains tax is only applicable if you make a profit i,e a gain here is a link for hm revenue website http://www.hmrc.gov.uk/cgt/property/basics.htm

Re: Capital gains tax?
 

Can she not buy the property in your name, so she never has to sell it to you in the first place?
I *think* that it can get sticky if your mother sells the proeprty to you at below market value, which it would be after renovation.

Re: Capital gains tax?
 

Whatever she sells the house to you for, her Capital Gains will be calculated on market value. She can deduct the cost of any improvements to the property, but not repairs.

Having said that, property values aren't going to go up and may well come down, in the timeframe you're talking about and as mentioned above she will have an allowance (I thought it was about £10k now). If she's not intending to dispose of any other taxable assets that might well take care of any potential gain.

There is a possible issue with inheritance tax if she sells you a property way below market value and then passes away within a couple of years. Depends on the difference in value, the size of her estate etc.

EDIT: I'm assuming above that it's not your mums intention to live in the property.

BTW I'm not an accountant but had to take advice on CGT last year when my wife sold a house she'd been renting out for a few years.

Re: Capital gains tax?
 

thanks for replies.
the problem i have is that if she gave me the money so i bought it in my name i would have therefor no way to pay her back as i would already own the house and have no reason to take out a mortgage on it to pay her back.
Tamsv- so if my mother sells it to me "on the cheap" she could get taxed? i would say after renovation that the property could easily be worth 40-60,000 more than current value.
i was thinking of paying for the renovation but there again it gets complicated as i wouldnt yet own the house.
very complicated stuff. prob best for me to ask a solicitor what is the best way to go about it.

Probably best to seek some specific advice. BTW, there's no reason you couldn't take out a mortgage on a property you already own.