Gifting my daughter some money to buy her first flat

annetheman

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?

Warby and others have nailed it. You should buy together and go through the normal processes for that OR genuinely gift it to her out of your own good nature, sign the gift declaration form the lender (they all have one) and then have trust that your daughter will, out of her own good nature (not documented in any agreement of any type) in 5 years gift you a proportionate amount equal to the £85K you gifted her.

saajan_12

annetheman said:

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?

Warby and others have nailed it. You should buy together and go through the normal processes for that OR genuinely gift it to her out of your own good nature, sign the gift declaration form the lender (they all have one) and then have trust that your daughter will, out of her own good nature (not documented in any agreement of any type) in 5 years gift you a proportionate amount equal to the £85K you gifted her.

Yeah, no. Have you read ANY of the thread? 
* Buying together might make sense if the OP wants a % of any capital increase / decrease as well, but will incur SDLT, CGT, arguments if the property isn't maintained etc. 
* Gift out of good nature - why don't you gift it to OP's daughter then? No? You're not good natured? They why expect OP to, that isn't what they were suggesting and people can be good natured without showering a free £85k on someone. 
* Sign the gift declaration for the lender - which lender? From the OP you quoted, "so she doesn't have to get a mortgage". 
* Trust the daughter will gift back out of her good nature - well either its a future gift, entirely voluntary, no expectation that it will happen and so no trust to be broken, or its a contractual amount OP expects to be repaid. You can't trust someone to do something you don't expect them to do. 

dimbo61

The Bank of mum and dad often wants to help the kids get on the property ladder.
So why not help your daughter by helping her get a LISA and saving £4,000 this year and another £4,000 after April 5th so with the government bonus she has £10,000.
Now this along with a gift from yourself of £2,500 makes a 15% deposit.
Can your daughter get a mortgage ? Of £72,500 with Yorkshire building society.
An Offset mortgage so you can open an account in your name and put £72,500 into the account.
She pays a normal mortgage amount each month but it's all repayment with no interest as " she" is  fully Offset !
You keep control of your money while your daughter gets her home and pays it off quickly.
You can tap into the money in your Offset account which she can't touch.
You could withdraw the mortgage amount each month to live on or spend on whatever 

Mickey666

No doubt I'm missing something but I can't understand the problem here or why the OP ends up with a 'beneficial interest' in the property.  Seems over-complicated to me.  As I see things:

1. Parent loans £85k to daughter.  Paperwork in place to make this a loan for a stated period of time and interest (maybe none?)

2. Daughter decides to use the money (plus some of her own?) to buy a house/flat.  Fair enough, it's her money.

3. Daughter sells house and repays the loan.

I don't see how or why the parent ends up with a beneficial interest on the property, unless they explicitly put a charge on it.  if not, it's just a standard unsecured loan isn't it?  What the daughter decides to spend it on is irrelevant, surely?

Sure, there are some risks involved for the parent that they probably wouldn't accept for a stranger, but we're talking about a parent-child situation where presumably there is a lot of trust and goodwill so it's not like a typical business transaction.

Oh, and no need to inform HMRC of anything at this stage and maybe not even later, depending on how the loan is repaid.

Aspatria

Thank you everyone for your input.
My daughter is putting in an equal amount of money that she has saved .
I started out calling this a loan, but was asked to refer to it as a ‘gift’ by the solicitor. I really don’t care what it’s called so long as she can get on the property ladder. Similarly the ‘point of sale’ agreement was the solicitors idea.

The money I am lending/gifting is part of my retirement sum, which I don’t need now (particularly in lockdown) but would like to use a bit later on for travelling etc. 

This started out as a straightforward idea between myself and my daughter to simply buy a (very) small flat outright that she could call her own. Then sell in 5 years or so when she is ready to move on and each go our separate (financial) ways.

Mickey666

Did you ask the solicitor why it should be regarded as a gift rather than a loan?  

SDLT_Geek

If it walks like a loan, quacks like a loan and looks like a loan,  then do not think of it as a gift!!!
There is a danger that by confusing the arrangement, you will end up as a joint buyer and a 3% SDLT liability on the purchase.

Aranyani

What if your daughter's circumstances change and she finds she struggles to sell down the line?  What would you be willing to do if you needed that money back?  

frogglet

If you can't afford to live without the money in a few years if something changes in your daughters life, I wouldn't call it a gift.

getmore4less

Mickey666 said:

No doubt I'm missing something but I can't understand the problem here or why the OP ends up with a 'beneficial interest' in the property.  Seems over-complicated to me.  As I see things:

1. Parent loans £85k to daughter.  Paperwork in place to make this a loan for a stated period of time and interest (maybe none?)

2. Daughter decides to use the money (plus some of her own?) to buy a house/flat.  Fair enough, it's her money.

3. Daughter sells house and repays the loan.

I don't see how or why the parent ends up with a beneficial interest on the property, unless they explicitly put a charge on it.  if not, it's just a standard unsecured loan isn't it?  What the daughter decides to spend it on is irrelevant, surely?

Sure, there are some risks involved for the parent that they probably wouldn't accept for a stranger, but we're talking about a parent-child situation where presumably there is a lot of trust and goodwill so it's not like a typical business transaction.

Oh, and no need to inform HMRC of anything at this stage and maybe not even later, depending on how the loan is repaid.

1. Because the loan is based on the return being a % of the property value.

Thats a beneficial interest in the property.