Parents gifting money, second charge and tax implications

Oxid8uk

My husband and I have separated. I would like to keep the house and can afford to take on the mortgage in my sole name but I am unable to raise his half of the equity to buy him out. My parents are therefore considering giving me the money to do this. The money will be a gift but they would also like it to be protected so are considering placing a second charge on the property. My mortgage lender is ok with this.

My questions are, what tax implications are there with them gifting me a large sum of money (>£50k)? Would they need to pay stamp duty even though they will not be named on the deeds?

TIA

Slithery

You can't protect a gift as it won't belong to your parents anymore.

If it's protected in any way then it's by definition a loan.

If your parents loan you money and put a charge on the property then they won't be liable for SDLT as they won't have a beneficial interest in the property, the same as any other lender. You may be liable for SDLT when you buy out your husband, depending on the financial settlement agreed as part of the divorce - but I'd wait for @SDLT_Geek to give you a definitive answer to that question.

theoretica

If it is a gift, what is the second charge for?  If it is a gift it becomes exempt from inheritance tax after 7 years.  If it is a loan (protected by the second charge) even if it does not have a repayment timescale then it will not become exempt from inheritance tax.

Oxid8uk

Slithery said:

You can't protect a gift as it won't belong to your parents anymore.

If it's protected in any way then it's by definition a loan.

Is there another way of protecting their money? Or would they just need to tell my mortgage lender that it is a loan but does not need to be repaid other than when the property is sold?

Oxid8uk

Another question I have is, could them gifting/loaning me this money be seen as a deprivation of assets?

user1977

Oxid8uk said:

Slithery said:

You can't protect a gift as it won't belong to your parents anymore.

If it's protected in any way then it's by definition a loan.

Is there another way of protecting their money? Or would they just need to tell my mortgage lender that it is a loan but does not need to be repaid other than when the property is sold?

If it's a gift then it's your money, not theirs. Do you really mean they're lending you the money?

Thrugelmir

Oxid8uk said:

The money will be a gift but they would also like it to be protected so are considering placing a second charge on the property. My mortgage lender is ok with this.

I'd be extremely surprised if the mortgage lender allowed the second charge to be registered. 

Slithery

Oxid8uk said:

Another question I have is, could them gifting/loaning me this money be seen as a deprivation of assets?

If they gift it to you then yes.

If it's a loan then no, as if they need the money you'll have to pay it back to them.

Keep_pedalling

Oxid8uk said:

Another question I have is, could them gifting/loaning me this money be seen as a deprivation of assets?

If it is a gift it is possible, but very much depends on their overall assets. If this is every penny they have then yes, but if they have plenty more where that came from then no.

What are they actually trying to protect this ‘gift’ from?

steve866

OP it sounds like your parents want to ensure this money isn’t taken into account when/if you get divorced, is that correct? 

housebuyer143

I would be surprised if a mortgage lender allowed this. By definition a gifted deposit is a gift, not a loan. Can you not just have an informal agreement to pay them back when you sell the house?