Issues to be aware of when buying property

Does anyone have any information about the issue of receiving support from parents for some of the deposit? Is it liable for gift tax - would there be any exemptions or any workarounds for the case of property?

No exceptions to the usual gift tax rules. However, you could set it up as a loan rather than a gift. Draw up a simple loan agreement using a reasonable interest rate and repayment schedule. (Make sure the agreement states that the loan is unsecured, as your mortgage lender will want to know whether there are any other debts attached to the property.) I did this when purchasing my house, as we received a loan from my in-laws that we paid back over the next 2 years.

If your parents really do intend to give rather than lend you the money, they could gift you a chunk of money each year free of gift tax which you could use to pay the loan back if you wanted to. The current limit is that each donor can give up to $14,000 per recipient, so if you have two living parents and they each make the maximum gift to you and your wife, that's $56,000 you can receive per tax year. You could also receive the maximum gift in December of one tax year and again in January of the next year allowing you to receive $112,000 within a short time.

No exceptions to the usual gift tax rules. However, you could set it up as a loan rather than a gift. Draw up a simple loan agreement using a reasonable interest rate and repayment schedule. (Make sure the agreement states that the loan is unsecured, as your mortgage lender will want to know whether there are any other debts attached to the property.) I did this when purchasing my house, as we received a loan from my in-laws that we paid back over the next 2 years.

If your parents really do intend to give rather than lend you the money, they could gift you a chunk of money each year free of gift tax which you could use to pay the loan back if you wanted to. The current limit is that each donor can give up to $14,000 per recipient, so if you have two living parents and they each make the maximum gift to you and your wife, that's $56,000 you can receive per tax year. You could also receive the maximum gift in December of one tax year and again in January of the next year allowing you to receive $112,000 within a short time.

From a US perspective, a loan would allow you to deduct interest you pay - your parents would naturally need to declare that interest as taxable income on their US tax returns. Interest would need to charged at least at the AFR at the start to avoid the risk of the IRS recharacterizing the loan as a gift. The interest rate itself would be specified in the loan agreement.  As politicalfool describes, it is common practice to waive the loan in chunks in later years to use up annual gift tax exemptions.

From a UK perspective, your parents would have to obtain HMRCs approval for you to pay interest without the withholding of UK tax http://www.hmrc.gov.uk/manuals/pimmanual/pim2110.htm

From a US perspective, a loan would allow you to deduct interest you pay

From a US perspective, the only type of interest that can be deducted is interest on a mortgage secured by the borrower's primary residence. A loan from the borrower's parents would likely be unsecured and the interest would therefore not be deductible.

Remember even for gifts over the annual $14,000 limit they can apply it to the lifetime exemption (this article describes it) and still be tax free. Of course it'd be like what most of us experience with the income tax - you have to file and report everything to the IRS, but you wouldn't owe anything unless the amount is high enough. The purpose of the gift tax is to avoid circumventing the estate/inheritance tax, and the exemption given to the latter can also be applied to the former (but it would reduce how much of the estate is exempt when they die). In your case how that'd be handled is up to your parents (since they, not you, would decide whether to pay the gift tax now or apply it to the lifetime exemption and would be responsible for any tax due).

What would be the implications if the OP just transferred the ownership to his NRA spouse once the property was paid for?

You can take itemized deductions on your US tax return for mortgage interest and council tax, although the way the deduction is calculated, you may not get much benefit.

Is this correct? I have been informed that one cannot take a deduction for council tax because it is not a property tax, but a tax on occupation, which is different.

The IRS explain here that to be deductible a real estate tax must be assessed on the owner; http://www.irs.gov/pub/irs-wd/12-0018.pdf - but council tax is assessed on the occupier rather than the owner.

Council tax is thankfully a qualifying foreign housing cost.