Changing rooms

By THIS IS MONEY
Updated:

 

MY retired parents own a four-bedroom detached house they want to swap for my three-bedroom semi. Both properties are freehold. There will be no money involved in the exchange. Is there any tax liability? D, Chester.

Ray Boulger at mortgage broker Charcol says: The only initial tax concern is stamp duty. The general rule is that this is payable only on the value of the lower-valued property, but there is nothing to stop you and your parents arranging privately to share the cost of this in whatever proportion you like.

The transfer itself is fairly straightforward, but use a solicitor to make sure all the legal requirements are complied with.

Maurice Fitzpatrick at accountants Numerica adds: There will be no liability for capital gains tax because each property is a 'principal private residence'.

However, the swap could give rise to an inheritance tax liability. If your parents' house is worth more than yours, they will be deemed to be giving you a sum equal to the difference in value between the two properties.

For instance, if your parents' home were worth £250,000 and yours £150,000, the £100,000 difference could count towards an IHT bill.

If either of their estates is worth more than £263,000 (the current IHT threshold) and either dies within seven years of the transfer you could be liable for inheritance tax on the £100,000, so seek professional advice.

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