We act for clients who are transferring their property to their daughter. There is a mortgage and the daughter will be taking out her own mortgage to redeem the parents mortgage and will be living in the property with her parents - I will be advising of the risks of losing the security of their home.
I am assuming that there is still an element of GWROB and am I right in thinking that this will be the value of the equity on the property?
I still need to talk to them regarding their intentions behind the transfer but if it’s a tax saving I would have thought that retaining some of the equity would mean no GWROB, subject to the amount retained, and furthermore there would be no 7 year rule running on the part transferred as consideration has been given for it and then on death of parents the estates get an additional deduction for IHT for joint ownership?
Effectively there’s two transactions here. Firstly there’s the gift of the equity, this is the amount that is potentially a GWROB. If they give the whole property and remain there without paying rent then the GWROB will cover the whole value gifted.
The second is the remortgage, which is in practice the daughter paying off the parent’s mortgage - this has SDLT consequences as it’s consideration for the transfer of the property.
As you say, if the parents retain a suitable amount of the equity (50% if they occupy half the property?) then this will avoid the GWROB triggering on the element gifted. However, in many of these cases the complication is getting the mortgage with elderly parents still on the title (which may be the entire reason for the transaction?).
On top of this consider the CGT element, the daughter will get main residence relief while she lives there, but if she moves out then CGT will start to accrue.