Buying a home or business for our daughter

Rod1883

Hi
Not sure if this is the correct forum for this, but here goes:
We, my wife and I, have worked hard for nearly 40 years each and are now taking retirement with a couple of reasonable cash lump sums. We have saved hard too and have a small inheritance through a sad family loss.
The sum total of all of this is that we have an estate, including our family home, that is well above the IHT threshold for a couple.
We are in good health and no imminent, we hope, risk of anything untoward happening.
We would like to help our daughter with a home and or business through purchasing one or both for her.
My question is this - is there any tax liability through us doing this to help our daughter? Are there any other things we need to consider/be aware of?
Thanks

jamesd

You're free to give money away if you want to. Such large gifts will cease to count for inheritance tax after seven years.

Other options for removing inheritance tax liability include many AIM shares and all EIS investments. Both are relatively high risk, though not compared to starting a business. Pension pots are also free of inheritance tax and free of all tax on death before age 75; from 75 they are taxed as income whenever the recipient draws money.

Snakey

Do you know that the rules are changing from next 6 April which will effectively increase the IHT band for couples like yourselves who will be passing on the family home to direct descendents? If you were only thinking of giving money away in order to avoid IHT then that might change your mind. It goes up to £1m in total, eventually.

Not that I want to do your daughter out of a free house or business mind you!! I think that if you don't need the money, and assuming you trust your daughter to do the right thing by you if something goes wrong and you fall on hard times, it must be nice to give it away while you're still alive and you get to see first hand what a difference it makes to the beneficiary's life.

Downside of giving stuff to other people is if e.g. they get divorced you may have to watch their other half walk away with 50% of it.

Rod1883

Thanks James and Snakey.
I was aware of the change in IHT band, phasing up to £1m by 2020 for couples.


We're not looking to give the money away just to avoid IHT, but really to give our daughter a good start in life. If it achieves both then all the better. The main reason for my post was to check if there is some rule or tax that would prevent us doing what I outlined.
If, for example, we were to purchase something costing circa £350k to £400k that was both a home and a business premises for her, would this attract any taxation, or would we need to do anything to prevent concerns from HMRC as it is over the current £325k single person IHT limit?


Thanks also for the cautionary note about future divorce type risk!

jamesd

That plan would trigger nothing, though if you were to own the property for a while you might have some CGT to pay. You can just give her the money instead so she can buy if you like, then there's no potential for a CGT issue.

FatherAbraham

Rod1883 wrote: »

Not sure if this is the correct forum for this, but here goes:

...

The sum total of all of this is that we have an estate, including our family home, that is well above the IHT threshold for a couple.
We are in good health and no imminent, we hope, risk of anything untoward happening.
We would like to help our daughter with a home and or business through purchasing one or both for her.
My question is this - is there any tax liability through us doing this to help our daughter? Are there any other things we need to consider/be aware of?
Thanks

It's not the right forum; proceed at own risk.

Simplest is to give the assets to her, and and buy seven years' of life insurance to pay the tax if you die too soon.

However, do not do this if her name is Goneril or Regan.

Warmest regards,
FA

kidmugsy

If the death that gave you the inheritance happened less than two years ago, you could execute a Deed of Variation that directs the money to your daughter, and it will be free of IHT because for IHT purposes it's treated as having come from the deceased.