Family finance · England · 2026 · Background research, not advice
Getting Dad's £270k into the home — the four routes
How your father can put his compulsory-purchase proceeds toward the £500k home he'll live in — and how each route is treated for stamp duty, income tax (POAT), inheritance tax, capital-protection and care funding. Figures illustrative; confirm with professionals before acting.
The instinct to gift the money is usually the worst route here — it creates a pre-owned-assets income-tax charge and a care-funding "deprivation" problem, and hands away control. Two better routes:
Co-ownership (declaration of trust) — Dad keeps a ~54% beneficial share of the home he lives in. Cleanest protection, no POAT, no deprivation issue, preserves his residence nil-rate band. Cost: loses first-time-buyer stamp-duty relief (~£15k vs £10k = £5,000 extra).
Documented no-interest loan — strong runner-up if the mortgage can't accommodate a co-owner. Protects the capital as a secured debt and keeps the £5k stamp-duty relief; the trade-off is tighter mortgage handling.
The whole decision is really a £5,000 stamp-duty saving vs protecting £270,000 — and £5,000 is the smaller number.
The four routes, side by side
1 · Outright gift Sister sole owner
2 · No-interest loan Sister sole owner
3 · Co-ownership Declaration of trust
4 · Dad on the title Legal co-owner
Avoid
Runner-up
Best fit
Hard to fund
First-time-buyer SDLT
Kept — £10,000
Kept — £10,000
Lost — £15,000
Lost — £15,000
Dad's £270k protected?
No — legally Sister's
Yes — debt owed to him
Yes — owns his share
Yes — owns his share
POAT / gift-with-reservation
POAT income-tax risk
Clean (holds a debt)
Clean (owns what he occupies)
Clean
Care "deprivation" risk
High — clear gift, no time limit
Low — money still his
Low — asset retained
Low
Mortgage / lender
Simplest
Loan may dent affordability; 2nd charge needs consent
Lender must accept co-owner behind its charge
Retired co-owner usually must be on the mortgage
Inheritance tax
£270k gift = PET, exempt after 7 yrs (POAT can undo)
Stays in estate as a receivable
Share in estate; preserves his RNRB
Same as 3
Stamp duty at £500,000: first-time-buyer relief = 0% to £300k + 5% on the next £200k = £10,000; standard rates = £15,000. No additional-property surcharge applies in any route, because everyone is either a first-time buyer or replacing their only home.
The technical heart: POAT & gift-with-reservation
Why a plain gift backfires. If Dad gifts the cash and then lives in the home it buys, the Pre-Owned Assets Tax (POAT) can apply — an annual income-tax charge on the market rent of the portion his money funded. There's a £5,000/year de-minimis, but if the notional rent exceeds it, the whole amount is taxable. On ~54% of a £500k home that threshold is blown easily.
The clean fix is not to gift at all. You cannot be POAT-charged for occupying property you genuinely own — so if Dad takes a beneficial share (route 3) or holds a debt (route 2), the POAT problem disappears. Classic gift-with-reservation is a weaker fit here (he's giving cash, not the house), but POAT is designed to catch exactly this cash-into-a-home pattern. → Tax adviser.
Stamp duty & who's on the title
For SDLT you always "look through" the legal title to the beneficial owners. A declaration of trust giving your parents a share means HMRC treats them as purchasers — and because they've owned before, first-time-buyer relief is lost (routes 3 & 4). To keep the £5k relief, the parents must have no beneficial interest (routes 1 & 2). That is the core trade-off: £5,000 saved vs £270,000 protected.
Cliff-edge: first-time-buyer relief vanishes entirely above £500,000. Keep the price at £500k or under.
Protecting the capital & the right to live there
Whichever route, layer these (via a solicitor):
Tenants in common + a declaration of trust recording each share (~54% Dad / ~46% Sister) and a right for your parents to occupy for life.
Form A restriction on the Land Registry title so it can't be sold or remortgaged without honouring the trust.
Wills all round — especially Sister's, so your parents can't be forced out if she dies first (a life interest over her share); consider life insurance on Sister to clear the mortgage on death.
Lasting Powers of Attorney for your parents.
If it's a loan: how to document it
Make it real, in writing
A written loan agreement: amount, interest-free, and repayment terms (on demand / on sale / on death).
Ideally secured by a legal charge (second charge) on the property — with the mortgage lender's consent, ranked behind their first charge.
Keep evidence of the money flow from Dad to the purchase.
How it's treated
IHT: not a gift — the £270k stays in Dad's estate as a receivable (no 7-year clock, but no reduction either).
POAT / deprivation: both avoided — he still has the money as a debt.
Mortgage: a lender may treat repayment as a liability; some ignore it if not repayable on demand. Declare it — a broker will know which lenders accept it.
Capital gains, IHT & care — quick facts
The Clarion compulsory-purchase sale: Dad's only/main home is covered by Private Residence Relief — expect no CGT. A compulsory purchase doesn't change that.
Future CGT: none while the new home is everyone's main residence. Risk only if Sister later moves out — her share could accrue a gain for that period. A loan avoids this for Dad entirely.
IHT: likely a non-issue — each parent has £325k + £175k (residence) allowances, frozen to 2031; their combined estate is well under the £1m couple's threshold. Don't let IHT drive the choice.
Deprivation of assets: there is no 7-year rule — a council can look at any past disposal. Gifting is the fact pattern they scrutinise; retaining the capital (routes 2–4) sidesteps it.
Who to involve
Mortgage broker (first): Which lenders accept a beneficial co-owner not on the mortgage (with an occupier's consent), or a secured family loan behind their charge? Does the loan reduce Sister's affordability on £202k?
Conveyancing / private-client solicitor: Tenants-in-common split, declaration of trust with life-occupation rights, Form A restriction, matching wills, SDLT treatment.
Tax adviser: Confirm POAT position per route, whether FTB relief survives, RNRB effect, no CGT on the sale.
Later-life / care solicitor: Deprivation-of-assets risk of each option for your father.
Important: Background research to frame a family decision — not regulated financial, tax or legal advice. All figures are illustrative and depend on the actual price, terms and Dad's pension income. Verify with qualified professionals before acting.