Building a house for someone else getting money back

[reddeagle]

Hi There,
This is a strange one. We recently had a property whos planning permission was running out. Rather than let the planning run out. I funded the building of the house thru cash and a personal loan (managed a good interest rate for it )

The house did not go in my name as a second site was to be mine and my goal was to build on that.

I did not get a mortgage for the first one becuase i wanted to use the mortgage on the second as it would be more expensive to build.

(p.s the personal loan i took out will be paid off with first stage of mortgage)

What is planned to happen with the first house is that when someone in the family reaches the age where they can afford a mortgage they will purchase this house and pay me back the money i have invested in it.

My questions is : Whats the consequences of this, and how will I manage to get my money back without getting caught for tax.

This is by no means a tax scam the goal was that while i could afford to build the house and no one else could. it would be a shame to loose the planning. I not lookin for profit on house just the money i put into it?


Any thoughts on this?

 

[ClubMan]

What is planned to happen with the first house is that when someone in the family reaches the age where they can afford a mortgage they will purchase this house and pay me back the money i have invested in it.

My questions is : Whats the consequences of this, and how will I manage to get my money back without getting caught for tax.

What is the relationship between you and the person who will eventually acquire the property? There are generous [broken link removed] exemptions on gifts between family members so you may be able to avoid some tax by gifting the property and the money in exchange. I'm not sure of the gifting or sale of the property in this case would trigger a [broken link removed] liability. [broken link removed] at half the normal rate (which could be 0%) would be payable by the related person acquiring the property. These are the key issues that I am aware of. However you should really get independent, professional advice on this matters because, as you say, it's slightly unusual. If you own another property as you Principl Private Residence while holding on this property then there may be investment property tax implications as well.

 

[reddeagle]

What is the relationship between you and the person who will eventually acquire the property?

This is for my sister. She is finishing college and rather put pressure on - do you want a house etc at that age we decided just to build it for her now.

The site that the house is on, is not in my name.As it stands the only person who knows I have an interest in this house is the builder who i paid the cash to.

[broken link removed] at half the normal rate (which could be 0%) would be payable by the related person acquiring the property. These are the key issues that I am aware of.

The site is not in my name it still remains in the name of my father. As we did not get a mortgage for the house there was no need to transfer deeds then.

I want the second site to be transferred to my name when the time comes prob this year actually. and this should be subject to father giving son a site type of tax?

Thanks for the very prompt reply

 

[ClubMan]

The situation is still not totally clear to me</p>

• Your father owns the site(s?)
• Who owns the property that was built?
• To whom did you give the money to fund the build and what sort of legal agreement covered this?
• What legal or other advice did you get on this matter?

As it stands the only person who knows I have an interest in this house is the builder who i paid the cash to.

I don't understand this. Surely others (e.g. your father) who have some interest in this site/property have noticed the property being built and wondered who funded this?

As we did not get a mortgage for the house there was no need to transfer deeds then.

Ownership and mortgage deeds are separate things.

I want the second site to be transferred to my name when the time comes prob this year actually. and this should be subject to father giving son a site type of tax?

If you read the Revenue Guide to CGT on one of the pages that I linked above links that I posted earlier you will see that there is an exemption for the transfer of a site for the development of a PPR from a parent to a child as long as certain conditions are adhered to.

I would strongly recommend that you get expert legal and general financial on this whole situation.

 

[Vanilla]

So your father owns the two sites, you funded the building of a house on one. Is this right?

I dont understand why your father didnt transfer the site into your name, as who ever owns the site, owns the house, regardless of how the house building was funded.

Its very difficult to give advice on this, as we dont know when the house is to go into your sisters name- and things may be different tax wise at that stage.
If it were to happen now, I suppose you would just do a deed between your father and your sister, which depending on the value of the site, should be exempt from CGT, stamp duty and CAT ( if its her first house and site and she intends to live in it as her PPR and if the house isnt fully built) and then you would do a deed of trust saying that you funded the building of the house and she is to pay you back. If the house is fully built, then its no longer the transfer of a site, but it is possible that there would be other exemptions applicable depending on the value.

So if it were shortly there would be no question of a gift from you to your sister. But if it is in years to come, then you are looking at a possible rise in value of the house and so on which would complicate things.