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Can one actually save hundreds of thousands without problems?
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Well that just got a little more complex, I'll mention it when I next see them. Sure they'll be happy with me sharing bad news, not.0
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This issue is that if the parents have been living there rent free, it's a gift with reservations, which might mean the gift is ineligible for inheritance tax relief. You need to get them to take a look at their situation to make sure that the gifting hasn't been ineffective.
http://www.hmrc.gov.uk/inheritancetax/pass-money-property/pass-home-to-children.htm#3
Good point, in addition the old wives tale of nominal rent i.e of 1 pound will not wash with HMRC. The rent will need to be consistent with a comparable property in the area for IHT to even be considreed0 -
Credit-Crunched wrote: »Good point, in addition the old wives tale of nominal rent i.e of 1 pound will not wash with HMRC. The rent will need to be consistent with a comparable property in the area for IHT to even be considreed
That's easily handled. Parents pay rent by direct debit, and then happen to find some cash lying around the house every month. It's amazing what you find down the back of sofas.I am not a financial adviser and neither do I play one on television. I might occasionally give bad advice but at least it's free.
Like all religions, the Faith of the Invisible Pink Unicorns is based upon both logic and faith. We have faith that they are pink; we logically know that they are invisible because we can't see them.0 -
gadgetmind wrote: »That's easily handled. Parents pay rent by direct debit, and then happen to find some cash lying around the house every month. It's amazing what you find down the back of sofas.
Yes, that's possible but the recipient has to declare that as income, which may pose problems0 -
Credit-Crunched wrote: »Yes, that's possible but the recipient has to declare that as income, which may pose problems
The recipient of such a random windfall perhaps should declare it as income, or maybe just use it when doing their day to day shopping. Using cash for such things is not (yet) illegal.I am not a financial adviser and neither do I play one on television. I might occasionally give bad advice but at least it's free.
Like all religions, the Faith of the Invisible Pink Unicorns is based upon both logic and faith. We have faith that they are pink; we logically know that they are invisible because we can't see them.0 -
gadgetmind wrote: »The recipient of such a random windfall perhaps should declare it as income, or maybe just use it when doing their day to day shopping. Using cash for such things is not (yet) illegal.
The parents would need to be in the property under an AST, a monthly sum of money coming into an account is clearly rent / income. HMRC have computer systems that are able to differentiate between petty cash and a n AST.
To rely on this when discussing IHT implications is a very very fine line to walk, 9/10 HMRC will not give the benefit of the doubt and the IHT implications could be quite substantial for the executor to sort out.0 -
Credit-Crunched wrote: »The parents would need to be in the property under an AST, a monthly sum of money coming into an account is clearly rent / income.
Yes, this needs to be in place and records clearly need to show that the parents are paying rent.
And if, hypothetically speaking of course, the kids wanted to help out parents with day to day living expenses, then this is perhaps done via acts of random generosity in pleasantly untraceable cash.
Of course, I would never advise anyone to do this, I simply observe that such a mechanism leaves a paper trail where it's required yet none in other areas. I'm sure that no-one actually does this and I would never contemplate it myself.I am not a financial adviser and neither do I play one on television. I might occasionally give bad advice but at least it's free.
Like all religions, the Faith of the Invisible Pink Unicorns is based upon both logic and faith. We have faith that they are pink; we logically know that they are invisible because we can't see them.0 -
Wow some comments on this thread!
1. OP your friends are certainly thicko's in their understanding of how higher rate tax (and tax in general works) - however I can assure you they are not alone sadly as I see all too often
2. There is no income tax on gifts in the UK (at present)
3. Most of all moneysaverlog tell your friends to take immediate professional advice (which is obvioulsy what they should have done in the first place). i can never ever understand people who think they know more than tax professionals when it comes to matters such as giving away your main asset that you live in - defies belief. Also if they did it in advice of a solicitor see if that solicitor advised them of the tax ramifications or if not, then to take professional tax advice. If he didn't then , well, they may wish to "have a word" with that firm and ultimately the Law Society0
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