God father gift?

Randall6169

Hi all thanks in advance for reading this, I hope this will help others and myself!
My girlfriend of 12 years godfather has offered to give me and my fianc!e £150000 so I can go in property development, by trade Iam a plumber and can do the majority of the work myself, so Iam very keen on the idea, the only problem is, the Godfather wants to give us the money? I don’t think this can be done without big tax implications or capital gains tax etc...
Has anyone got any idea of the best routes around saving money, I know tax etc will need to be paid somewhere, but the best way around not paying too much ie gifting or buying the house in our name?
We already have our own mortgage on our own property and so does he, we would possibly look at buying a house in full, either via auctions or estate agents depending on what’s on the markets!
Please do not comment if it’s nasty or a waste of time, this is a genuine question for my predicament, we appreciate we are very lucky to be in this circumstance and appreciate any help

buggy_boy

I don't think the gifting of the money is a problem unless the godfather dies within the next 7yrs then inheritance tax may be payable if the estate is over the threshold.

To be honest with all the taxes (additional 3% SDLT and capital gains tax) it is tough to make money. The best way to get into property development to avoid taxes is to sell your house, buy a run down house, live in it while you renovate, sell and repeat.

This avoids the additional 3% SDLT and any capital gains tax, however if you flip too often HMRC may cotton on especially if there is huge differences in price, you are allowed to buy a run down property to live in do it up and sell it but you are not allowed to do it as a business however as far as im aware there are no guidelines about how many times you can do it or when it becomes a business so you would need to be careful.

You probably know though as a plumber living in a property that is being refurbished is not fun.

Randall6169

Unfortunately the 7yrs May be an issue!! Fingers crossed not but there is a scare at the moment, say no more!
Could myself and my girlfriend remortgage our house in my name and then he buy in hers?

My problem is he is old school and just says “I’ll buy it you in your name and the tax man needn’t know wink wink” But I know I’ll end up in the brown and stinky if it goes wrong and would rather avoid any problems and do it officially if anything goes wrong
Thanks again

trailingspouse

Could you ask him to leave the money to you in his will?


It would solve all of the problems you're already aware of, and would also avoid any risk of 'deprivation of assets' being an issue for the godfather too (that's where an older person gets rid of assets in order to avoid paying care home fees). It also means, should he be in failing health and find that he needs the money to make his life more comfortable, he's got it - but if he comes to the end of his life and hasn't needed it, then you get it, which is what he wanted all along.



Yes, of course it means you don't get the money immediately - maybe not for many years, maybe not at all if he finds he needs it - but in the meantime you can do lots of research into the property business, maybe even gain more qualifications, and generally decide if this really is what you want to do.

[Deleted User]

Randall6169 wrote: »

Hi all thanks in advance for reading this, I hope this will help others and myself!
My girlfriend of 12 years godfather has offered to give me and my fianc!e £150000 so I can go in property development, by trade Iam a plumber and can do the majority of the work myself, so Iam very keen on the idea, the only problem is, the Godfather wants to give us the money? I don’t think this can be done without big tax implications or capital gains tax etc...
Has anyone got any idea of the best routes around saving money, I know tax etc will need to be paid somewhere, but the best way around not paying too much ie gifting or buying the house in our name?
We already have our own mortgage on our own property and so does he, we would possibly look at buying a house in full, either via auctions or estate agents depending on what’s on the markets!
Please do not comment if it’s nasty or a waste of time, this is a genuine question for my predicament, we appreciate we are very lucky to be in this circumstance and appreciate any help

Why do you think his gift of £150k will attract 'big tax implications' when there is no gift tax in the UK? I'm not sure why you think the gift would attract capital gains tax either.

You want to start a property developing business so I think you need to do some more research on what taxes that will attract otherwise how do you know it will even be profitable?

AdrianC

The IHT implications aren't your problem. You don't pay the tax. His estate does.
The money is tax-free to you.

eddddy

There is no tax on gifts.

However, assuming he gives you the money, and you use it to buy a property - your solicitor will need to do anti money laundering checks.

i.e. The solicitor will need to check that the money is legitimate (and not the proceeds of crime etc)

Since the money came from your godfather, the solicitor is likely to want to see your godfather's past bank statements etc, and ask your godfather how it was accumulated.

If your godfather has a history of "the tax man needn’t know wink wink” (or just takes the view that it's none of the solicitor's business) he may not want to be cooperative, which could prevent the purchase.

getmore4less

buggy_boy wrote: »

I don't think the gifting of the money is a problem unless the godfather dies within the next 7yrs then inheritance tax may be payable if the estate is over the threshold.

The same tax that would have been due if there had been no gift

people get confused with the 7 year rule that some how it causes tax.

Most absolute gifts are IHT neutral for 7 years.

Big gifts can save a bit through taper relief.

There are some extra complication that can cause a gift to have implications for 14 years but probably don't apply here.

getmore4less

IS this really going to be an absolute gift or will there be strings attached that he gets a cut from this business venture?

Comms69

Randall6169 wrote: »

Hi all thanks in advance for reading this, I hope this will help others and myself!
My girlfriend of 12 years godfather has offered to give me and my fianc!e £150000 so I can go in property development, by trade Iam a plumber and can do the majority of the work myself, so Iam very keen on the idea, the only problem is, the Godfather wants to give us the money? I don’t think this can be done without big tax implications or capital gains tax etc...
Has anyone got any idea of the best routes around saving money, I know tax etc will need to be paid somewhere, but the best way around not paying too much ie gifting or buying the house in our name?
We already have our own mortgage on our own property and so does he, we would possibly look at buying a house in full, either via auctions or estate agents depending on what’s on the markets!
Please do not comment if it’s nasty or a waste of time, this is a genuine question for my predicament, we appreciate we are very lucky to be in this circumstance and appreciate any help

There is zero risk to you. No tax due on gifts.


Any Inheritance issues would be for the executors to resolve

t0rt0ise

AdrianC wrote: »

The IHT implications aren't your problem. You don't pay the tax. His estate does.
The money is tax-free to you.

That's not true. The recipient of the gift could be liable.

https://www.bbc.co.uk/news/business-36014533