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Tax liabilities on swapping properties
Posted: 04 May 2018 03:14:48(UTC)

Joined: 04/05/2018(UTC)
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Hi all,

I'll try to make this simple rather than rambling.

- My partner has owned a buy to let for the past 5 years (no mortgage)
- Her father lives in a bigger place around the corner (also no mortgage)
- Her father also owns a buy to let.
- He would like to downsize and also reduce the inheritance tax liability
- The plan is to sign her property over to him, for him to live in, and his property over to her for
us to live in.

From what I can gather, she would pay capital gains tax on the increase in value of her property when it is transferred him. Also, he would incur the additional 3% stamp duty as he already owns a buy to let.

Just wondering if there is anything I have missed or if anyone can suggest a better way to swap the properties over?


philip gosling
Posted: 07 May 2018 17:07:29(UTC)

Joined: 06/01/2013(UTC)
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Yes it seems both will be in effect "selling" their houses - he will be exempt capital gains tax as he is 'selling' his main residence but will be liable to the 3% surcharge tax and purchase tax at current value of her home because he has another BTL house.

"....If a property is given away or sold at less than market value, any taxes will still be payable as if it was being paid for at market value, provided that the person receiving it is a "connected person e.g. daughter etc ...."

She will pay capital gains tax on her BTL & purchase tax on 'his" house because she is in effect 'buying' his property.

If you try to dispose of assets at below market value you do not escape Inheritance Tax etc.

She could take out a massive mortgage on her BTL which could subsequently offset capital gains (some time later). She also could move into her BTL and declare it her main residence and get last 18 months free of price increase as capital gains and thus reduce capital gains tax.

1 user thanked philip gosling for this post.
DanBRK on 08/05/2018(UTC)
Posted: 08 May 2018 08:37:48(UTC)

Joined: 04/05/2018(UTC)
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Hi Philip,

Thanks for your comments, very helpful.


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