Income Tax/Capital Gains Tax?

JBTISH

Monday 10th January 2022

Good morning

Thank you for taking the time to read this.  I have some questions about receiving either a gift of a car or the value of the car as a cash lump some bank transfer.

I am unemployed and have been for several years and also homeless.  An Aunt living abroad has offered to either purchase a car for me or offer the value of the car a cash lump sum by bank transfer. She is alive and living abroad but her bank account is on the UK mainland. These facts are correct as of this posting. Only these facts are applicable and no other solutions or variables are available. ie I can’t take the money and buy a shed or spend it on something else.

My questions are:

1. What would be the name of the Tax (if applicable this would come under? Income Tax? Capital Gains Tax? 

2. Who (if applicable) would have to pay any tax owed to HMRC? Myself or my Aunt?

3. If she passes away within 7 years I’m led to believe this would ‘then’ be an Inheritance Tax issue. Would this be at the ‘current value’ (2022) of the vehicle or cash lump sum or would the tax owed be tapered’ over time  pro rata reducing over the 7 years? ie Would less Inheritance Tax be owed if she dies in Year 5 of 7 (if applicable) as an example. 

4. Which would it be better to receive, in your opinion given the rigid facts, from the perspective of paying the least Tax if applicable? Obviously people will reply ‘what helps you more…?’ But either is the same as the full some will be spent only on a car… so my question purely relates to Taxes potentially due, not what would personally benefit me if I spent the cash on something else.

It’s the Car, The Cash to buy a Car or Nothing. Obviously she could buy the car for me and put it in my name a sole owner. Please don’t ask the ‘obvious other questions’.

Thank you again for taking the time to read this. Happy New Year.

Jenni_D

The obvious other being ... how can you be a registered keeper if you're homeless? Which address would the V5C be sent to?

To your questions - it won't be Capital Gains; that relates to profit - i.e. an increase in value of something between purchase and sale.

Income tax might apply for a cash lump sum, but it would be factored against your tax allowance, not hers. More likely it would be treated as a gift (in either capacity - car or cash) and so subject to Inheritance Tax should she die within the proscribed period. As to which rules would apply - I suspect it would be those when she dies, not now, but IANAL or tax advisor.

JJ_Egan

Best would be to visit your Local Citizens Advice Center  or even local Inland Revenue .

If you are unemployed how are you going to find the money for Tax and Insurance  and Fuel etc .

Neil_Jones

Best thing I'd say is a car doesn't just stop at a lump of metal on four wheels.  It will require to be road worthy, be insured, have vehicle tax, an active MOT... You must have motor insurance for your vehicle if you use it on roads and in public places.

You do not need to insure your vehicle if it is kept off the road and declared as off the road (SORN). This rule is called ‘continuous insurance enforcement’.  Note:  This literally means off the (public) road.  Your vehicle is off the road if you do not keep or use it on a public road, for example if it’s in a garage, on a drive or on private land.

The other thing as well... can you drive?  Driving lessons are not cheap.  If you aim to sleep/live in the car (which is not illegal by the way, but its not an "ideal" thing long term) and the car will be on the public highway, it requires to be insured, taxed and have an active MOT.  Which is expensive.  The other risk you take as well as if PC Plod comes along, finds you in said car and assumes you are "in charge" of it, and you don't have a a licence...  Hello potential fine and vehicle seizure if you can't prove you own it.

If you don't drive now and you don't have work, you will pay a fortune for car insurance on its own, never mind anything else.

  Hope you can afford it as your aunt's generosity will probably stop at the purchasing of the car and not the ongoing running costs.

neilmcl

It would be better if the gift was indeed cash. No cash gift will be subject to tax unless it in itself generates income, ie, interest. There may be inheritance tax to pay should your family member die but that will depend on how much was gifted and how long after the gift the family member dies.

Heedtheadvice

Not the correct forum area to ask such a question! Though some of the answers will show that it is not as simple as it might first appear.

Further complicated by the fact that the relative lives abroad! Some of fhe answer will depend upon her own tax status i.e. where she is considered to be resident and thus under which tax jurisdiction(s) she is taxed. It may be uk, land of current residence or both..

Best response was that to get advice plus those highlighting that the gift brings it's own issues.

Easiest option, though that might not be acceptable, is to have the car as a gift snd then sell it straight away to convert to cash, keep enough squirreled away if there are any tax implications for you -I suspect not - but even that mightbe going against wishes or conditions attached to the gift and will be difficult to do given your homeless status.

Whatever is agreed you need to address your homeless status as a prerequisite to taking any other action.

SiliconChip

If she gives you the cash then that belongs to you and you can spend it on whatever you want, which in your circumstances shouldn't be a car. Inheritance tax, if it ever applies, will be paid by the estate and not by you so forget about it.

JBTISH

Heedtheadvice said:

Not the correct forum area to ask such a question! Though some of the answers will show that it is not as simple as it might first appear.

Good morning Heedtheadvice

Thank you for taking the time to reply. I was very meticulous in selecting a Tax forum to post this Question so I am not sure what happened but thank you for bringing this to my attention. 

Le_Kirk

Maybe try this one: -
https://forums.moneysavingexpert.com/categories/cutting-tax
or any of the others with TAX in the title!

cx6

The answer to this is simple. 

There is no UK tax to pay on gifts (cars, money, boats, anything). You Aunt can give you the money or the car (or both!) and there is no UK tax to pay - either income or capital gains or anything else.

You said your Aunt lives abroad - she needs to check the tax rules in that country about ***giving*** gifts. Normally there in no tax to pay for the giver, but check.

Inheritance tax is indeed something to consider. In UK an estate is allowed to bequest £325k inheritance after that the estate pays 40% tax on the rest. The car / money would count towards that limit. However, as time goes by that is reduced by the inheritance tax taper up to year 7 (Google it)

However if your aunt is still abroad for tax purposes when she dies the inheritance tax laws of that country will apply.

RumRat

Not really sure why a relative would make a stipulation to a homeless family member that it needs to be a car or nothing???  Seems odd to me.....