Gifting my daughter some money to buy her first flat

Aspatria

I’m planning to gift my daughter £85k to buy her first flat so that she does not need to get a mortgage.
We have been advised by her solicitor that it needs to be called a gift rather than a loan.  We are drawing up an agreement that states that when the property is sold  (in approx 5 years time) we each take our money out proportionate to what we put in.
Is there anything I should be telling the revenue now or just the capital gains when we sell?

davidmcn

Aspatria said:

I’m planning to gift my daughter £85k to buy her first flat so that she does not need to get a mortgage.
We have been advised by her solicitor that it needs to be called a gift rather than a loan.  We are drawing up an agreement that states that when the property is sold  (in approx 5 years time) we each take our money out proportionate to what we put in.

Then it isn't a gift, is it?

SDLT_Geek

If you have a share in the property then even if your name is not on the title, I expect the extra 3% SDLT will be due.  That is, assuming you have another property.

frogglet

If you want it back in 5 years its not what I would call a gift.

hopeitwill

We're buying our house with a gift and you'd have to give up any right you have to that money with official papers through the solicitor. As the others say, it's not called a gift if that's how you'd like to handle it.

princeofpounds

Currently, you are considering mortgage fraud - declaring it as a gift whilst setting up an interest-free loan.

getmore4less

princeofpounds said:

Currently, you are considering mortgage fraud - declaring it as a gift whilst setting up an interest-free loan.

Guess you did not read the initial post.

£85k to buy her first flat so that she does not need to get a mortgage.


Long running thread on this subject a while back 

Solicitor is wrong you can have it as a  loan rather than a gift but there are implications.

Taking a beneficial interest in a  property.
2 main things to consider
SDLT :second home applies if you have one already
CGT : assessment on disposal  if you don't have PRR to negate that there could be a CGT bill/.


Just  a Loan
You get back what you put in
if you charge interest then that is taxable as income.

AdrianC

Aspatria said:

I’m planning to gift my daughter £85k to buy her first flat so that she does not need to get a mortgage.
We have been advised by her solicitor that it needs to be called a gift rather than a loan.  We are drawing up an agreement that states that when the property is sold  (in approx 5 years time) we each take our money out proportionate to what we put in.
Is there anything I should be telling the revenue now or just the capital gains when we sell?

If there was a mortgage, then there is a big difference between gifted and loaned equity - and a gift means a genuine gift, not a "gift"-with-an-expectation-of-being-repaid. That's a loan with a marketing department...

If it's an outright purchase, no mortgage, then you can call it what you like and wrap it in whatever expectations you wish. In effect, it's a private mortgage repayable on sale. Whether you want to put a charge on it is up to you.

phillw

Aspatria said:

We have been advised by her solicitor that it needs to be called a gift rather than a loan.  We are drawing up an agreement that states that when the property is sold  (in approx 5 years time) we each take our money out proportionate to what we put in.
Is there anything I should be telling the revenue now or just the capital gains when we sell?

Did you inform the solicitor that you are drawing up this loan agreement?
I would be very wary of signing an agreement that said the money would be returned on the sale of the property, while telling anyone that it was a gift.
Pick whether it's a gift or a loan and go with it. Your daughter can always gift you money one day if you need it, if you need the agreement because you don't trust her to see you right in the end then giving her written evidence of tax evasion is not a smart move & if the solicitor knows then I'd question their integrity too.

princeofpounds

getmore4less said:

princeofpounds said:

Currently, you are considering mortgage fraud - declaring it as a gift whilst setting up an interest-free loan.

Guess you did not read the initial post.

£85k to buy her first flat so that she does not need to get a mortgage.


Long running thread on this subject a while back 

Solicitor is wrong you can have it as a  loan rather than a gift but there are implications.

Taking a beneficial interest in a  property.
2 main things to consider
SDLT :second home applies if you have one already
CGT : assessment on disposal  if you don't have PRR to negate that there could be a CGT bill/.


Just  a Loan
You get back what you put in
if you charge interest then that is taxable as income.

LOL stupid me. I always make mistakes by reading too quickly. You know what threw me off? The solicitor saying it had to be called a gift. I just assumed they were insisting on that because of a mortgage. Yeah, with no mortgage, it's odd.

warby68

The solicitor's advice was possibly presuming your daughter would need a mortgage and mortgage lenders usually require gifted deposits to be certified as such.
This is clearly not a gift, its a loan and I don't see why you can't document it properly to protect you both and for clarity.
If in her name, you can take a charge over the property to protect your interest as well.
Alternatively you can buy it together with documentation to cover respective shares.
If solicitor still thinks you need to make it a gift when it really isn't, I would be asking why and whether there are some other factors in the mix.