Loan Repayable on Death

Curious_Moose

I'm after clarification if HMRC are likely to get involved in the following scenario if someone could shed some light.


Person A has loaned person B £10,000. There is a loan agreement to this effect which is attached to the will of person B. On the death of person B, the loan of £10,000 will be repaid to person A.


There is no issue about the loan being repaid, the question is simply "will HMRC want to see evidence of the loan agreement, or will the fact that the loan is being repaid as part of the winding up of the estate be enough?".


The point here being that Person A does not want to have any unnecessary dealings with HMRC, simply because there have been cases of HMRC taking ages to sort these types of issues out, and causing stress over several months before the green light is given, or worse, HMRC simply making a wrong decision and thereby causing even more stress plus a tax demand.


The alternative is for the £10,000 to be explicitly left by Person B to Person A in their will (and so the loan would no longer be attached to the will), in which case it will form part of the standard winding up process of the estate. In this case, presumably, HMRC would not be interested as it would simply be the directions of a will being discharged. The total estate is under the inheritance tax threshold.


Thanks.

wwl

If it's under the IHT threshold, HMRC shouldn't be involved iether way.

Curious_Moose

wwl wrote: »

If it's under the IHT threshold, HMRC shouldn't be involved iether way.

So there's no possibility of HMRC being notified of the £10,000 suddenly appearing in the bank account of Person A and wanting to know where it came from?

wwl

If there is, as long as it can be shown as having come from the executor of the estate, there shouldn't be an issue.
Unless someone already has form, 10K appearing in a bank account is unlikely to be sufficient enough - HMRC are only likely to get actively notified by the bank for cash transactions.

Keep_pedalling

Person A will only be of interest toHMRC if they are charging interest on the lone.

What happens if person A dies first? Unless person A's will converts the loan to a gift then person B could find themselves being chased for repayment be person A's executor.

getmore4less

Keep_pedalling wrote: »

Person A will only be of interest toHMRC if they are charging interest on the lone.

What happens if person A dies first? Unless person A's will converts the loan to a gift then person B could find themselves being chased for repayment be person A's executor.

with the loan descibed A's executor will have to wait till B dies.

Curious_Moose

Keep_pedalling wrote: »

Person A will only be of interest toHMRC if they are charging interest on the lone.

What happens if person A dies first? Unless person A's will converts the loan to a gift then person B could find themselves being chased for repayment be person A's executor.

No interest is being charged on the loan so hopefully that's another reason for HMRC not to get involved. Thanks.

Yorkshireman99

Curious_Moose wrote: »

No interest is being charged on the loan so hopefully that's another reason for HMRC not to get involved. Thanks.

If the recipient of the £10K is on means tested benefits this might affect their claim if they have other savings and this makes them go above the threshold.

Curious_Moose

Yorkshireman99 wrote: »

If the recipient of the £10K is on means tested benefits this might affect their claim if they have other savings and this makes them go above the threshold.

The recipient is a basic rate taxpayer and not in receipt of any means tested benefits. Thanks.

Yorkshireman99

Curious_Moose wrote: »

The recipient is a basic rate taxpayer and not in receipt of any means tested benefits. Thanks.

Then the person due to receive the £10K has nothing to worry about.