Paying for Friend's Property Renovation

yefi

I have a friend who wishes to sell his house. Unfortunately, he let it fall into disrepair and in its current condition he will be lucky to cover his mortgage and debts.

We have a quote from a builder to bring the house up to snuff for around £35K. As my friend does not have the money for this, I will be paying for all of the work, and upon the sale of the property, he will transfer the money back to me.

My only concern is will this incur some sort of tax and will I need to keep proof of all costs in case it is queried? (Or would it be wiser to say that the money is a gift from him to me?)

zygurat789

yefi wrote: »

I have a friend who wishes to sell his house. Unfortunately, he let it fall into disrepair and in its current condition he will be lucky to cover his mortgage and debts.

We have a quote from a builder to bring the house up to snuff for around £35K. As my friend does not have the money for this, I will be paying for all of the work, and upon the sale of the property, he will transfer the money back to me.

My only concern is will this incur some sort of tax and will I need to keep proof of all costs in case it is queried? (Or would it be wiser to say that the money is a gift from him to me?)

You are making a loan, no tax relief. You receive the loan repaid, no tax charge fair enough.
If your friend should fail to repay the loan in full you may have a CGT loss to offset against any gains you may make in this year or to be carried forward for when and if you do.

CLAPTON

yefi wrote: »

I have a friend who wishes to sell his house. Unfortunately, he let it fall into disrepair and in its current condition he will be lucky to cover his mortgage and debts.

We have a quote from a builder to bring the house up to snuff for around £35K. As my friend does not have the money for this, I will be paying for all of the work, and upon the sale of the property, he will transfer the money back to me.

My only concern is will this incur some sort of tax and will I need to keep proof of all costs in case it is queried? (Or would it be wiser to say that the money is a gift from him to me?)

it would seem the truth is sufficient:
you are lending your friend money (interest free) and later he will returning it

keeping records would be a good idea

xylophone

Have a loan agreement drawn up, signed and dated by you and your friend and witnessed by a third party?

csgohan4

Be careful, sometimes lending large amounts of money to friends/family can end in tears

yefi

Thank you for the replies, much appreciated.

csgohan4 wrote: »

Be careful, sometimes lending large amounts of money to friends/family can end in tears

I have more faith in a black hole spontaneously appearing on Earth than I have of this person willfully not repaying me. However, I realize that willingness is only half of the equation. One stipulation of the loan is that he deeds the house to me in his will.

xylophone

One stipulation of the loan is that he deeds the house to me in his will.

I think that this might be difficult to enforce!

Surely the best idea is to see a solicitor and have a properly drafted loan agreement drawn up, signed and witnessed?

Savvy_Sue

xylophone wrote: »

I think that this might be difficult to enforce!

Surely the best idea is to see a solicitor and have a properly drafted loan agreement drawn up, signed and witnessed?

Plus a deed of trust so that he can't sell it over your head.

Although I thought he was doing it up to sell it? so are you hoping to be repaid for your generosity when he dies, or when he sells it?