Can we save tax by buying in our children’s names?

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Can we save tax by buying in our children’s names?

Question

We are in the process of buying a flat for our two children (20 & 24) to live in. We only want to charge them a nominal rent i.e. enough to cover our small mortgage on the property. Does that cause any problems when submitting a tax return and will the property be subject to CGT if we decide to sell?

 

Arthur Says

If the rental income is completely offset by the interest repayments (not capital repayments) of the mortgage, then you will have nil rental income, and not have any concern with the tax return. However the property will be subject to capital gains tax when sold, because principal private residence relief is not available, since the owners are not the occupiers. There are ways round this, involving trusts, but this involves advanced tax planning.

 

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