© The Financial Times Ltd 2015 FT and 'Financial Times' are trademarks of The Financial Times Ltd.
I am the sole owner of my £1m property but am thinking of transferring part of the property’s value to my long-standing partner (to whom I am not married), perhaps for cash, perhaps as a gift. I have a mortgage of £200,000. What are the tax, legal and administrative issues?
Christopher Groves of solicitors Withers says that assuming the property has always qualified as your principal private residence then – regardless of whether you are married – the transfer will not trigger any potential capital gains tax liability. A sale to your partner – whether married or unmarried – will be subject to stamp duty.
A gift would not give rise to any stamp duty, although if your partner took on liability for your mortgage that would be treated as a payment. If this transfer involved taking on joint liability for the mortgage then your partner’s share of the mortgage would effectively be £100,000 – below the stamp duty threshold.
If you transfer a half interest in the property, you and your partner can choose to hold it as tenants-in-common or joint tenants. Under a joint tenancy, the share of one on death passes automatically to the survivor. As tenants-in-common, on death you can each pass on your share of the property as you wish. Unequal shares may only be held as tenants-in-common.
Any transfer should be registered at HM Land Registry. You will also need the consent of your mortgage company, which is likely to require that the transfer be carried out by a solicitor.
I have Canadian and British dual citizenship. Having lived in the UK for eight years, I have built up a good company pension. I have now moved to Canada and am wondering what to do with the UK pension: should I keep it in the UK or transfer it to Canada?
Paul Garwood, director of wealth manager Smith & Williamson, says that individuals who migrate from the UK can transfer their UK pension funds to an overseas pension scheme provided it is a qualifying registered overseas pension scheme (QROPS). HMRC’s website provides a full list of QROPS for you to see if the scheme to which you are proposing to transfer is included.
A transfer can also be made in anticipation of leaving the UK and will generally require the individual to take up employment overseas so that they can join a QROPS. There are no formalities other than the UK pension provider satisfying itself that the transferee pension scheme is an approved QROPS and that the individual is a member of the scheme. The transferring scheme must notify HMRC that the transfer has been made if the individual is resident in the UK or was resident in one of the previous five tax years. The QROPS then undertakes to HMRC to comply with a number of procedures.
It is obliged to report future payments made to UK residents or individuals who are either resident in the year of payment or who were resident in one of the previous five tax years. This enables HMRC to establish whether the QROPS has paid out money which, had it been made from a UK scheme, would have been an unauthorised payment and attract a tax liability.
Some jurisdictions do not give upfront tax relief on pension contributions but pay out wholly tax free. If this is the case with the transferee scheme it might be possible to encash your pension tax free, even though you received upfront tax relief in the UK, subject to the payout being made outside of the QROPS reporting window referred to above.
You should also check the status of the tax-free cash you might receive from the UK fund. By transferring to an overseas pension scheme this might be converted into a taxable pension. Equally if you don’t transfer you might find that when you withdraw your tax-free cash from the UK scheme this might be treated as an advance of pension in Canada and taxed.
You should also check the UK/Canadian double taxation agreement to understand how your UK pension would be taxed in Canada and then compare this with the tax status of the Canadian scheme to which you might transfer your benefits.
If you are in a final salary pension scheme in the UK, you should consider whether the transfer value offered is good value for the benefits you will be giving up.
I am a university student set to receive £12,000 from a trust. I have been looking at Isas and am interested in the stock market but don’t know where to start. It will probably be another couple of years before I am in a position to buy a property so I am happy to tie up the money for this period at least.
Michael Owen, financial planning director of IFAs Brooks Macdonald, would not recommend an investment in equities for as short a time as two years. Stock markets carry risk and equity investment should normally only be considered for periods of five years or more.
If you have any high-interest borrowings on credit or store cards you should pay them off. As well as being expensive, any debts outstanding when you seek a mortgage may reduce what you can borrow.
If you have no borrowings, there aren’t many exciting places to invest with capital security. Index-linked gilts (government bonds) offer a tax-free guaranteed return in excess of inflation and can be bought through a stockbroker. Three-year Index-
Linked National Savings Certificates bought from the Post Office or online from www.nsandi.com can be cashed in before expiry but the return is not as attractive. Over three years these will yield 1.3 per cent above the Retail Price Index – currently 4.5 per cent – giving a potential return of 5.8 per cent a year. This is also tax-free.
If you are a non-taxpayer, a building society account with instant access should offer around 5.95 per cent interest but rates will be variable. Taxpayer or not, interest of just over 6 per cent is available from some cash Isas, into which £3,000 per tax year can be saved.
Copyright The Financial Times Limited 2015. You may share using our article tools.
Please don't cut articles from FT.com and redistribute by email or post to the web.