Tricky situation

PaoloGotti

Here is the problem:

Mortgage owed on my house of €50k.

Partner has €50k available.

He wants to “buy into” house. €50k would be 20% of market value.

How does he give me the €50k without it being a cash gift subject to CGT, thus enabling me to pay off the mortgage, get the title deeds off the bank, then do a tenancy in common with shared % split ownership?

Is there any process (except getting married) we can go through to avoid CGT in this scenario?

Thanks

Spook_ie

Could you not take out a joint mortgage for the outstanding 50k?

I'd be worried about the commitment to the relationship if you're already looking at splitting ownership 80/20

PaoloGotti

Thanks for your reply.

My understanding is that a joint mortgage is a joint tenancy deed and thus seen as a 50:50 split from a CGT perspective.

How would one alleviate your concern for the relationship without paying a hefty CGT liability? I’d transfer over 50% if I could.

Bicyclette

I think you should get some legal advice on this. If he wants to buy in, presumably he wants to be on the deeds as well.

One possible way out of things at the moment would be to take a loan from him of the amount outstanding. Put it in a signed and witnessed document that it is a loan, with a repayment date starting a year from now. Set the interest rate at a nominal rate.

The year will give you some breathing room. But I still think you need to get independent legal advice.

PaoloGotti

Thanks for your reply.

I hadn’t thought of the loan route. But thinking it through, I wouldn’t be able to pay it back as the money will go to the bank for the mortgage. And I don’t think I can put in writing: will pay you back with a share of the gaff, which technically at the time of writing would not be mine to give due to the mortgage.

Accept I will have to go through my solicitor to do the deed, no pun intended, but they aren’t very helpful in a problem solving sense, I tend to have to tell them the route.

Geuze

First of all, gifts aren't subject to CGT. Gifts are subject to CAT.

Second, it seems you want to sell 1/5 of your house to your boy/girl friend, in return for which they will pay you 1/5 of the market value?

If that is the case, then I don't see why CGT or CAT is involved? Their is no gift, as the partner is paying the market value for the one-fifth share of the house.

Or am I missing something?

Bicyclette

https://www.boards.ie/discussion/comment/119796297#Comment_119796297

CAT is Capital Acquisitions Tax and its payable on money and property inherited or gifted. There are different exemption thresholds but you can receive up to €3,000 per annum from any one person without any liability https://www.revenue.ie/en/gains-gifts-and-inheritance/cat-thresholds-rates-and-aggregation-rules/cat-groups-thresholds.aspx

CGT is the gain on the sale of a capital item, such as a house. Although you are not liable for CGT on the sale of a principal private residence. However this isn't a full sale. And this is where you need clarification. Its not straightforward.

There is a CAT exemption on gifts between Civil Partners or Married Couples. And that may be relevant in this case. https://www.revenue.ie/en/gains-gifts-and-inheritance/cat-exemptions/transfers-between-spouses-civil-partners/index.aspx If you are getting to the point where are sharing property, this might be worth looking at. Are you at the point where a civil partnership or a marriage is on the cards?

PaoloGotti

https://www.boards.ie/discussion/comment/119796297#Comment_119796297

Sorry, I meant CAT.

The issue I have is a chicken and egg one I guess. If I take their money without having an ability to transfer part ownership of the house (because of the mortgage) then technically the money is a gift. But without their money I can’t get the bank out of the picture.

PaoloGotti

https://www.boards.ie/discussion/comment/119796698#Comment_119796698

My understanding is that civil partnerships are no longer accredited since the marriage equality act.

Marriage is on the long finger. We ideally want to settle the mortgage asap before planning a wedding.

Geuze

https://www.boards.ie/discussion/comment/119796942#Comment_119796942

OK I see.

You want to sell 1/5 of the house, but as there is a mortgage, you feel that the bank won't allow the sale.

I suggest asking a sol, or asking on AAM.

The loan suggestion above is good.

naughtyboy

My advice is keep it simple, get married.