A client has asked me about selling a 2nd property at a reduced price (£300k for a £700k house value) but then they also want to charge the new owners a rent for the ‘gifted’ part. Is this Gwrob or Poat or something else?
FA 1986 s102B(3)(a) would seem to offer protection from the reservation of benefit provisions if the donor gifted only a share of their interest in the property. In the current post it seems 100% is being gifted.
Malcolm Finney
Michelle
I think you probably need to confirm what the transaction might be before you can work out the tax position.
I don’t think the client can charge rent on a property they don’t have any interest in.
The payment could presumably be:
- rent because they are actually retaining 4/7ths of the property and remaining tenants in common with the “buyer”, who only receives 3/7
- delayed/deferred consideration in addition to the £300k
- part consideration for the sale of the whole property in the form of some kind of annuity (in addition to the £300k).
- some weird form of settlement in which they retain an interest in possession in 4/7ths and the trustee charges the buyer rent for that share (query who the trustee(s) would be).
Also consider that s17 TCGA 92 may deem a disposal otherwise than by way of a bargain made at arm’s length to still be at MV for CGT purposes, irrespective of the fact these are otherwise unconnected parties.
Duncan McGowan
Stevens & Bolton LLP
Duncan, point taken but the post doesn’t comment on whether the parties are connected or otherwise.
Malcolm Finney
The parties are connected - the mother has a £700k property currently rented to unconnected tenants - tenants are moving out so she wants her daughter to buy it at a reduced price but she wants to continue to receive an income so she’s asked the daughter to pay ‘rent’ to her. the daughter is likely to move into it with her family