I live in a home with my family. The home was jointly purchased by me and another person (who is of no family relation) who was helping me to get on the property ladder by owning a portion of it because I could not afford it on my own. My wife and I have spent a fair bit on upgrades/extensions etc (with no reference to our share agreement...ie we paid it without bothering to get any portion back since we were the residents benefitting). The home is now worth far more than when we bought it (in addition to rising market prices) We are going to be selling the house soon and the other person has very generously offered to give us his portion of the shares in the tenants in common agreement. He has never lived in the house, it has been my family's residence for 7 years. 1) is it legal for us to alter the share agreements from the original tenant in common share split?2) What tax obligations will i have with HMRC and do I just report it on a self assessment?
Yes, you can change the ownership of the property - but this will trigger a capital gains tax disposal on your friend - as he has disposed of his share of the property to you.
On the sale of the property there will be no capital gains tax payable by you as you have lived in this house and any gain will be exempt due to "principle private residence" relief.
If your friend does not gift his share of the property to you he will be liable to capital gains tax on any sale and this will be based on his proportion of ownership (50% of sale proceeds less 50% of cost).
He is aware of the cgt regardless of whether he keeps his share or not, but I assumed I would be liable for inheritance tax or some equivalent on the share of funds I receive as a result of the transfer. Also if I get "principle private residence" relief do I need to self assess for that or is that is that automatically awarded in which case I really don't need to deal with HMRC on the sale?
There is no inheritance tax consequences on you if you are gifted the share of the property. However, your friend will have an inheritance tax issue - but as long as he/she lives for a further 7 years from the date of the gift this will not form part of their estate for IHT purposes.
As you are eligible for PPR on the sale this disposal does not have to be reported to HMRC.
CTA, ATT - over 10 years experience in UK tax - CGT, IHT & personal tax