Equity Release to Fund a Child's House Purchase & Tax Implications

Leodogger

We are hoping to fund the deposit for my son's house purchase with Equity Release on our property which is paid for but he owes HMRC some tax from previously being self employed (one of the 3m failed by the government with no furlough or loan to support him during the Pandemic).     

If we pay his deposit on a house purchase, would this have tax implications for him with HMRC or could they demand some of the money back to pay off the tax debt?

user1977

I don't see any specific implications about the funds coming from your equity release, but obviously any assets he does have (whether gifted by you or not) would be potentially available to his creditors.

Where is he getting the remainder of the funds for his purchase? I would have thought the bigger problem would be getting a mortgage if he's currently unable to pay his tax bills?

Leodogger

user1977 said:

I don't see any specific implications about the funds coming from your equity release, but obviously any assets he does have (whether gifted by you or not) would be potentially available to his creditors.

Where is he getting the remainder of the funds for his purchase? I would have thought the bigger problem would be getting a mortgage if he's currently unable to pay his tax bills?

He has a permanent reasonably paid job so has the income to pay the mortgage, he just doesn't have savings.    The "assets" part of your comment though does give me concern because unless he agrees a payment plan with them, you are right, they could grab his property to pay the bill although I would think that that would be the last resort!  I think he would need to agree a payment plan with HMRC first before he went ahead with the property purchase.

user1977

Leodogger said:

user1977 said:

I don't see any specific implications about the funds coming from your equity release, but obviously any assets he does have (whether gifted by you or not) would be potentially available to his creditors.

Where is he getting the remainder of the funds for his purchase? I would have thought the bigger problem would be getting a mortgage if he's currently unable to pay his tax bills?

He has a permanent reasonably paid job so has the income to pay the mortgage, he just doesn't have savings.    The "assets" part of your comment though does give me concern because unless he agrees a payment plan with them, you are right, they could grab his property to pay the bill although I would think that that would be the last resort!  I think he would need to agree a payment plan with HMRC first before he went ahead with the property purchase.

He may be comfortable that he has the income to pay the mortgage, but a mortgage lender will want to know more about his general financial position - I doubt they'll be happy to lend him money if he already has debts which he has difficulty in paying.

MWT

Leodogger said:

I think he would need to agree a payment plan with HMRC first before he went ahead with the property purchase.

The equity release part of this is a red herring, nothing to worry about regarding the source of your gifted deposit.

Your son needs to sort out his tax before you gift anything and before he starts trying to get a mortgage...

HMRC are not usually unreasonable as long as you do engage with them to sort things out, ignoring them and their communications is what will usually end badly...

Leodogger

MWT said:

Leodogger said:

I think he would need to agree a payment plan with HMRC first before he went ahead with the property purchase.

The equity release part of this is a red herring, nothing to worry about regarding the source of your gifted deposit.

Your son needs to sort out his tax before you gift anything and before he starts trying to get a mortgage...

HMRC are not usually unreasonable as long as you do engage with them to sort things out, ignoring them and their communications is what will usually end badly...

Yes, I agree and I did tell him to sort out a payment plan first although I have been told by a debt helpline that if he made himself bankrupt he may be refused a mortgage altogether !

Exodi

Leodogger said:

MWT said:

Leodogger said:

I think he would need to agree a payment plan with HMRC first before he went ahead with the property purchase.

The equity release part of this is a red herring, nothing to worry about regarding the source of your gifted deposit.

Your son needs to sort out his tax before you gift anything and before he starts trying to get a mortgage...

HMRC are not usually unreasonable as long as you do engage with them to sort things out, ignoring them and their communications is what will usually end badly...

Yes, I agree and I did tell him to sort out a payment plan first although I have been told by a debt helpline that if he made himself bankrupt he may be refused a mortgage altogether !

Woh hold up, where did bankruptcy come into it? At first I thought you perhaps meant 'what if HMRC made him bankrupt' but upon re-reading it sounds as if the master plan between you now is to apply for bankruptcy, then apply for a mortgage?

Did you really need to call a debt helpline to realise this wasn't the best plan?

Why the desperation to buy a house? If you're desperate to help, why not just pay his tax bill?

Sea_Shell

Leodogger said:

We are hoping to fund the deposit for my son's house purchase with Equity Release on our property which is paid for but he owes HMRC some tax from previously being self employed (one of the 3m failed by the government with no furlough or loan to support him during the Pandemic).     

If we pay his deposit on a house purchase, would this have tax implications for him with HMRC or could they demand some of the money back to pay off the tax debt?

How much is "some tax"?

Can you afford to pay this off for him as well as provide the deposit?

Leodogger

Exodi said:

Leodogger said:

MWT said:

Leodogger said:

I think he would need to agree a payment plan with HMRC first before he went ahead with the property purchase.

The equity release part of this is a red herring, nothing to worry about regarding the source of your gifted deposit.

Your son needs to sort out his tax before you gift anything and before he starts trying to get a mortgage...

HMRC are not usually unreasonable as long as you do engage with them to sort things out, ignoring them and their communications is what will usually end badly...

Yes, I agree and I did tell him to sort out a payment plan first although I have been told by a debt helpline that if he made himself bankrupt he may be refused a mortgage altogether !

Woh hold up, where did bankruptcy come into it? At first I thought you perhaps meant 'what if HMRC made him bankrupt' but upon re-reading it sounds as if the master plan between you now is to apply for bankruptcy, then apply for a mortgage?

Did you really need to call a debt helpline to realise this wasn't the best plan?

Why the desperation to buy a house? If you're desperate to help, why not just pay his tax bill?

He declared bankrupty 18 months ago !   He has had a permanent job for the last 18 months.    We can't afford to pay his tax bill AND give him a 40% or more deposit towards a house.   He is 52 years of age and he may have to put down a much larger deposit because of that and the fact that he was a bankrupt.   I have since found out that you can still get a mortgage but depending on how long ago it was means you would have to provide a larger deposit.   I also have a daughter who wants to purchase a house and we would have to give them the same amount each, another reason we can't afford to pay his tax bill and his deposit.    It was our suggestion for him to buy a house since his rent keeps going up to well over £1000 per month and we said it would be cheaper to buy a house as the payments may well be lower than that!

Leodogger

Sea_Shell said:

Leodogger said:

We are hoping to fund the deposit for my son's house purchase with Equity Release on our property which is paid for but he owes HMRC some tax from previously being self employed (one of the 3m failed by the government with no furlough or loan to support him during the Pandemic).     

If we pay his deposit on a house purchase, would this have tax implications for him with HMRC or could they demand some of the money back to pay off the tax debt?

How much is "some tax"?

Can you afford to pay this off for him as well as provide the deposit?

Please see my reply above.     

MWT

Leodogger said:

He declared bankrupty 18 months ago !   He has had a permanent job for the last 18 months.    We can't afford to pay his tax bill AND give him a 40% or more deposit towards a house.

It feels like there is more to this than you may want to get into on a public forum, but if he declared bankruptcy 18 months ago and has been in a permanent job since then, how did he fail to get his self-employed tax debt included within the bankruptcy?