loan to family member

1forrls

I made a loan to m aunt 21 years ago so she could stay in her home. The interest has been rolling up with a legal charge on the property. The house is to be sold as she is going into sheltered accommodation. Am I liable to tax on the income?

[Deleted User]

depends if its income or capital gains,either would attract tax but capital gains probably less,i`d tele hmrc and ask

roger196

1forrls wrote: »

I made a loan to m aunt 21 years ago so she could stay in her home. The interest has been rolling up with a legal charge on the property. The house is to be sold as she is going into sheltered accommodation. Am I liable to tax on the income?

Have you been declaring the interest each year to HMRC on the amount credited to the account? Interest is chargeable to income tax ( used to be Schedule D, case III).
Occasionally ALL the interest is charged in one sum for the tax year when it is paid. My tax knowledge is not up to date, so you will need to do your own research. You need to examine the deed to find the precise details of the arrangement. If it is called interest, it is most likely to be interest.
You should go to www.hmrc.gov.uk and look up "interest", "interest received" and "rolled up interest".
If you have failed to declare the interest on your tax return, it is in your favour if you make a "voluntary disclosure" to the revenue as penalties are less. See if one of the accountants who specialise in investigation cases will give you a free half hour to advise. Depending on your occupation, this may trigger an investigation into your whole affairs.

iolanthe07

I really think you should get professional advice on this one and not rely on an internet forum.

Rafter

also depends how you financed the loan.

If you used savings that would otherwise have been taxable then yes - you do have a tax liability. However, if you borrowed the money to make the loan, and charged the same rate to your aunt, you could argue some sort of set off applies.

As iolanthe says - you should really take advice from a personal tax accountant. There may be ways of your aunt gifting you some money each year in lieu of interest to reduce your liability. It all really depends on the sums involved.

I would certainly speak to an accountant and roger196's advice also makes sense to me as a qualified accountant with rusty and out of date personal tax knowledge!

Good luck

R.