: Basically, my dad is wanting to transfer his house into my name (to avoid inheritance tax when he passes away, he's only mid fifties so hopefully a long time away yet) but there's so many charges & tax's that I can't understand it all.
My dad said he heard of a way that I could buy the house from him for £1 tax free.
Would this in anyway be possible or is someone just telling him a load of rubbish?
If it's not possible what is the best way to make the transfer?
: The complications arise if there is an agreement that he continues to make use of the house after the sale. In any case he needs to live for at least 7 years for the gift to be tax free.
: It's total rubbish. HMRC is well aware of this sort of thing and doesn't allow it. If he dies within 7 years the house would still be assessed for inheritance tax whatever happens, unless you buy it from him at the full market price.
If he continues to live in the house it would be classed as a "gift with reservations" unless he paid you a market level rent and wouldn't be classed as a valid transfer at all, either for inheritance tax or care costs.
Assetts must be transferred at the market price or HMRC smell a rat. Usually quite rightly because someone is trying to work a fiddle. As in this case.
: Obviously if he doesn't own the house when he dies, you wouldn't be "inheriting it", but that doesn't relieve all tax burden arising from the gift.
A professional estate planner can assist you with the options for minimizing the taxes and complications when he dies.
: In the USA we do a quit claim Deed and state that a sale was to a daughter/son/brother/sister/father/mother sale and taxes are usually only $15 dollars. The sale is completed upon recording of the deed. and register with the city for regular taxes (billing on the property) as usually paid.
: To avoid inheritance tax altogether your dad can officially pass on his house to you for free and then all he has to do is to ensure that he survives the next 7 years or more. Any property passed onto his family members will not attract inheritance tax at all if he survives for the next 7 years or more.
: There are some silly answers here. Nothing you have described is anything like tax evasion (which is not paying tax that is due). At best it is tax avoidance (arranging your affairs so tax does not become due).
Also, selling the house and renting it back will do nothing to reduce inheritance tax (IHT), because simply swapping a house worth (say) £100k for £100k in cash does not change the value of the assets owned. IHT is based on the value of the estate - it makes no difference with this is a house or cash, it gets taxed the same.
Selling the house for £1 is the same as giving it away, and it is treated that way for IHT purposes. If the house was worth £100k and it was sold for £10k, then the remaining £90k would be treated as a gift, and so on.
Gifts are not taxed when made, and if the giver survives for 7 years then it is absolute. But if they die within 7 years the value of the gift (or part of it) is counted as part of the giver's estate for IHT purposes.
However, if a house is given away, but the giver continues to live their as if it was still theirs, then it will be treated as theirs for IHT purposes indefinitely. So if your dad does want to gift you the house, he will have to move out, or pay you the full market rent.
You should also be aware that if this is your second house, you will pay capital gains tax (CGT) when you sell it. And CGT is charged on the profit you make, so if you are given it, you will pay CGT on the entire value.