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What interest rate would you charge your family?

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Comments

  • Gromitt wrote: »
    Thinking about this for a minute, if anyone did this (not just the OP, and not just to family members), how would people stand legally as regards HMRC? Surely the income must be reported?

    Income? What income? I guess he would pay the debt himself to avoid money going to her theirfore nothing wrong.
  • YorkshireBoy
    YorkshireBoy Posts: 31,541 Forumite
    Part of the Furniture 10,000 Posts Name Dropper
    hayton2k3 wrote: »
    Income? What income? I guess he would pay the debt himself to avoid money going to her theirfore nothing wrong.
    You've taken a different angle to me. I assumed Gromitt was talking about mum's repayments to the son being deemed as 'income'.
  • opinions4u
    opinions4u Posts: 19,411 Forumite
    Interest charged should be declared for tax purposes.

    If it was structured as "interest free" and then Mum "gave" a lump sum as a sign of gratitude at the end, then that wouldn't be taxable.
  • You've taken a different angle to me. I assumed Gromitt was talking about mum's repayments to the son being deemed as 'income'.

    Wouldn't HMRC already know he has the 10K?
  • izools
    izools Posts: 7,513 Forumite
    1,000 Posts Combo Breaker
    All they would need to do is write up a contract according to basic contract law (not the CCA 1974) which would be legally binding.

    This and the paper trail of the funds being Faster Paymentsed to her would be proof that it is NOT an income.

    Although that may be the case in law, in the case of this specific proposition I think this mother would be better off not getting any help or taking any advice from this "son" until he's learned what it means to be a functional part of family unit as this is clearly a principle completely foreign to him at the moment.
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  • zzzLazyDaisy
    zzzLazyDaisy Posts: 12,497 Forumite
    Part of the Furniture Combo Breaker
    Well, just to put another point of view (I hold my hands up - I am a lawyer - our brains are wired differently....)

    I loaned my cousin money. She was in debt because her no-mark of a husband left her with two young children and a huge overdraft on their joint account, and legal fees trying to chase him down and get a reasonable settlement in the divorce.

    I had money in a high interest fixed savings account, which is specifically earmarked to pay my care needs. I can't afford to lose/give away this money.

    So I drew the money out and gave it to her on the understanding that she would pay me back, plus the interest I had lost by taking it out of the account, but that she did not have to make any payments until the house was sold and she got her share. I also drew up an agreement to that effect which she was happy to sign.

    She was thrilled because it eased her immediate financial worries and meant that she could pay off credit cards and cope until the no-mark ex was forced to pay up.

    Eventually she sold the house, paid me back, and everyone was happy.

    As I say, I'm a lawyer, I accept I may see things differently from some people, but it worked for us, so I am just putting the other side of the coin.

    (Having said that, I would never have loaned her any money if I had thought the problem was down to simple mismanagement, because that sort of thing has a tendency to snowball....)
    I'm a retired employment solicitor. Hopefully some of my comments might be useful, but they are only my opinion and not intended as legal advice.
  • Gromitt
    Gromitt Posts: 5,063 Forumite
    hayton2k3 wrote: »
    Wouldn't HMRC already know he has the 10K?

    He was talking about handing over 10K and getting 10K + interest back, effectively getting income through an investment with a certain risk.

    If it took her a year to pay it back @ 3.2%, thats £320 income, right?
  • I'd loan the money, get it in writing, and for £320 (10k at 3.2%) would probably let it slide. If it were multiple years (so many lots of £320), or if the relationship was bad, or..or..or... then I might avoid. It's also a shame that you need to take it out of your ISA. As an idea, you could (if your rating was good) sign up for a 0% deal and BT some of the balance (unlikely on a students income to get the lot across) but it might help.

    This reminds me very much about the heated discussions I had when living at home. My parents are excellent, but they strongly felt that when I lived at home and started working that I should pay housekeeping. I felt that as I was saving every penny for a house deposit that "family should be supporting family" and that by taking money off me, regardless of the amount, they would "sapping away my chances". Dad strongly felt that you should "always pay your way in life" and that he was teaching me a life lesson - even though my saving for a house had meant I was already well ahead. We still hold our opposing views, many years after I moved out, and I often wonder how I'll feel about charging my kids should I have some. In short, I feel that their decision to charge me was wrong, and although they have helped me financially multiples of times over what I paid in housekeeping, I'll always remember it.
  • Mojisola wrote: »
    If you can't get a job when you finish being a student and try to claim JSA, they will probably count you as having that £10,000. You will be expected to live off that before you can claim means-tested benefits.

    If it's all been lent to your Mum and she can't repay you, you're going to be in trouble.

    Well, at least two of us realise the snag in all this.
  • I got into CC debt in the nineties, It was painful but I got out of it. I have neve had a debt since (well I have a mortgage) but I would say no pain, no gain. Until anyone "gets it" LBM or whatever its a waste of time.
    I have a mate who pleaded with me for a loan of £300 which I gave him, this crept up to £500 over a couple of months, I've never seen a penny and that was years ago. I tried to get his bank charges back (£6k:eek:) his bank offered him £1100 he accepted and spent it in a fortnight, he will never "get it".
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