HMRC and loan agreements

BowerBadgers

Does HMRC accept loan agreements from templates that you can download from the internet, if, say, the signatures are witnessed by a solicitor? My sister and I want to lend our Dad £180,000 to fully buy out the proportion of a property he's currently renting until he sells his main home. We need to prove it's a loan so we wouldn't pay IHT should the worst happen before he sells his main home. Solicitors charge hundreds of pounds for drawing up a simple straightforward agreement. HMRC won't tell me whether they would accept an agreement downloaded from the internet. 

sourcrates

If you have 180k making a big hole in your back pocket, then what does a few hundred quid more to have it legally blessed matter ?

For that amount of money, I would not be taking any chances.

MEM62

What makes you think you would have an issue with IHT?  

Ergates

MEM62 said:

What makes you think you would have an issue with IHT?  

If the father dies before he can pay it back, it could be considered part of his estate.   If it was an "official" loan then there would be a credit agreement etc in place.  If it's just a lump of money that appears in his account from a family member, how would they indicate it shouldn't be considered part of the fathers estate.

Thrugelmir

BowerBadgers said:

HMRC won't tell me whether they would accept an agreement downloaded from the internet. 

No one is going to give an opinion on something legal until they have need to. Your biggest issue maybe if it falls under the Consumer Credit Act as a regulated agreement. 

MEM62

Ergates said:

MEM62 said:

What makes you think you would have an issue with IHT?  

If the father dies before he can pay it back, it could be considered part of his estate.   If it was an "official" loan then there would be a credit agreement etc in place.  If it's just a lump of money that appears in his account from a family member, how would they indicate it shouldn't be considered part of the fathers estate.

Father currently renting.  Does not have assets (or liquid assets, anyway) to fund a property purchase.  It is therefore unlikely, based on what the OP has stated thus far, that the father's estate will be sufficiently large to incur IHT.  Hence my question.  

Ergates

MEM62 said:

Ergates said:

MEM62 said:

What makes you think you would have an issue with IHT?  

If the father dies before he can pay it back, it could be considered part of his estate.   If it was an "official" loan then there would be a credit agreement etc in place.  If it's just a lump of money that appears in his account from a family member, how would they indicate it shouldn't be considered part of the fathers estate.

Father currently renting.  Does not have assets (or liquid assets, anyway) to fund a property purchase.  It is therefore unlikely, based on what the OP has stated thus far, that the father's estate will be sufficiently large to incur IHT.  Hence my question.  

Father is renting and the loan is "until he sells his main home" so the father *does* have assets which, depending on the value of the main home and his share of it, could easily incur IHT.

BowerBadgers

Ergates said:

MEM62 said:

Ergates said:

MEM62 said:

What makes you think you would have an issue with IHT?  

If the father dies before he can pay it back, it could be considered part of his estate.   If it was an "official" loan then there would be a credit agreement etc in place.  If it's just a lump of money that appears in his account from a family member, how would they indicate it shouldn't be considered part of the fathers estate.

Father currently renting.  Does not have assets (or liquid assets, anyway) to fund a property purchase.  It is therefore unlikely, based on what the OP has stated thus far, that the father's estate will be sufficiently large to incur IHT.  Hence my question.  

Father is renting and the loan is "until he sells his main home" so the father *does* have assets which, depending on the value of the main home and his share of it, could easily incur IHT.

That's correct, Ergates: My father's estate would incur IHT. His previous home is valuable, and he has part-bought a retirement apartment, and is renting the other part.
Since this post, I've spoken to a tax expert at a law firm who is confident that a template agreement downloaded from online and witnessed by a solicitor would be acceptable.