tax implications on main residence

[DownInAlbion]

Hi, before I go to an accountant and ask this question, I thought I'd pose it on here as there seems to be quite a bit of accounting expertise here (I used to post a long time ago on here as ScottDotNet).

To cut a very, very long story short (if there are qualified accountants on the forum who think they can give me further guidance, I'd be happy to appoint them and fill you in on the full story), I am currently arranging a main residence mortgage on a house which my sister is going to live in, and which her, my father and myself are going to pay for (brief overview, her husband has walked out, deserted her and young son, she doesn't want to sit on her arse on benefits, so we're seeing this as a family investment). The reason I am arranging the main residence mortgage is because my sister needs to move to be close to my parents (so they can help look after kid), and the area they live in is beyond her price range (however, we are getting the house from a family friend heavily discounted, so great investment potential). My parents have a main residence mortgage on their house as well, so they can't have it in their name either. A buy to let mortgage won't cover the value of the house, as these we're told are based on the approximate monthly earnings of the property. Anyway, I'm rambling on, my question is basically this - if the mortgage is in my name, the house deeds are in my name, yet my sister and father contribute to the cost of the mortgage, does that affect my tax position? My guess is, most definately. However our IFA (who is regulated by the FSA etc etc) says "it should be ok"... well I'm sorry, "it should be ok" is not going to help me sleep at night...

Has anyone had any similar experience? Or can give me advice on this? I'm especially concerned as, being an IT contractor, I don't want to give hector any additional reason to bend me over.

[Rebecca Loos]

there are better sites than this one to ask this, as this is not really a contrator-specific question.

I'd recommend www.taxationweb.co.uk/forum , they have great contributors who know what they're talking about.

[tim123]

You only get the PPR CGT excemption on a house that you *actually* live, or have lived, in. No exceptions (anymore).

If your sister lives in it and you don't, you will have to pay CGT when you sell it.

OTOH, if your sister is paying rent you can deduct the mortgage interest payments from the rent before paying tax on that. If your sister is paying less in rent than the interest you can roll over the remaining loss for future deductions against income from the *same* type of venture (i.e property letting, could be a different house though). You cannot (normally) claim the loss against other income (or the CGT bill).

The fact that your father is paying some of the mortgage is probably not significant as this can be declared as a gift from him to you, and the amounts are likely to be within the tax free limits (and even if they are not the only applicable tax is IHT and the amount is going to be small in comparision to the IHT limits).

Of course you could lie, pretend that you live in it and hope that you aren't found out (you probably won't be), perhaps that is what "should be alright" means.

tim

[DownInAlbion]

Thanks for the responses guys. I've now also posted my question on taxationweb as suggested Rebecca. Tim, thanks for all the information you provided.