Second Home and IHT

Cosmo_Kramer

Keep_pedalling said:

Cosmo_Kramer said:

Albermarle said:

These situations can be complicated but I would have thought that by paying for the house, but splitting the ownership three ways, they effectively gifted you and your brother one third of the property at that time. If this was more than 7 years ago, then this should have no effect on IHT.

The house was sold recently and my parents want to transfer around £200k to me.

When the house was sold you should have been legally entitled to one third of the value. I would have thought you would have just received this directly from the conveyancing solicitor as you owned one third of the property? Did this not happen for some reason? How much did the house sell for?

Many thanks for your response. 

Ah. In terms of HMRC viewing this as a gift, I thought that the seven years would start ticking now - when I receive the £200k? But you think it started ticking in 2005, when the property was purchased…?

The house was recently sold for around £600k.

My parents negotiated the sale of the property on our behalf and dealt directly with the solicitor, etc. I told them on numerous occasions that it would look much cleaner if my share of the proceeds was transferred directly from the solicitor. They failed to sort this out for some reason, and the full £600k was transferred to my parents. 

£200k is more than a quarter share so some of this is a second gift. 

There are four names on the title deeds (mum, dad, daughter, son), but my parents are counting themselves as a couple and splitting it into thirds. 

Hmmm. Do you think I am only legally entitled to a quarter? 

Thanks

Albermarle

Keep_pedalling said:

Cosmo_Kramer said:

Albermarle said:

These situations can be complicated but I would have thought that by paying for the house, but splitting the ownership three ways, they effectively gifted you and your brother one third of the property at that time. If this was more than 7 years ago, then this should have no effect on IHT.

The house was sold recently and my parents want to transfer around £200k to me.

When the house was sold you should have been legally entitled to one third of the value. I would have thought you would have just received this directly from the conveyancing solicitor as you owned one third of the property? Did this not happen for some reason? How much did the house sell for?

Many thanks for your response. 

Ah. In terms of HMRC viewing this as a gift, I thought that the seven years would start ticking now - when I receive the £200k? But you think it started ticking in 2005, when the property was purchased…?

The house was recently sold for around £600k.

My parents negotiated the sale of the property on our behalf and dealt directly with the solicitor, etc. I told them on numerous occasions that it would look much cleaner if my share of the proceeds was transferred directly from the solicitor. They failed to sort this out for some reason, and the full £600k was transferred to my parents. 

£200k is more than a quarter share so some of this is a second gift. 

Unless maybe only one parent was on the deeds.

poseidon1

Really can't see the confusion here.

In 2010 and assuming it was appropriately documented as such ( to be checked) your parents gifted to you 1/3 share of a property which has now sold for a gross amount of £600k  (Solicitors/ estate agents fees  to be deducted therefrom).

Ignore the fact parents received the entire proceeds you are legally entitled to 1/3rd.

Now each of  you are required to pay CGT  within 60 days of sale and you indicate you will be doing so.

Therefore from what you have said, if parents have given you a gross amount of £200k, the only 'gift' to you is 1/3rd of the solicitors and agents fees and other related costs, which you will see on the property sale completion statement.

In this regard presumably the accountant is calculating attributable gains based on third shares?

Your parents each have £3000 annual gift exemption so if they have not used this, the 1/3rd of property sales costs 'gifted' to you is comfortably covered within that exemption. Ergo no IHT exposure whatsoever, so don't concern yourself on that subject. 

I only wish your accountant had had sufficient presence of mind to have clearly explained this to you,  rather than the vague statement to ' build your case '.

Just an observation in passing, your parents failure to pass onto your brother the entirety of his 1/3rd share is messy.

Your brother has a personal CGT exposure on his  proceeds whether  he receives it or not. Are your parents purporting to pay this for him? Even if they do he  will still (in my view)  have a legal claim for the net difference after tax which I would maintain would become a debt on your parents estate, if they do not pay him during their lifetime.

Suggest they talk this through with their solicitor, since regardless of their  'trust issues' it does not sound like a sensible course of action.


EDIT:
I now see house acquired 20 years ago, so no potential for GROB from 2005 until occupying daughter vacated.

Keep_pedalling

Cosmo_Kramer said:

Keep_pedalling said:

Cosmo_Kramer said:

Albermarle said:

These situations can be complicated but I would have thought that by paying for the house, but splitting the ownership three ways, they effectively gifted you and your brother one third of the property at that time. If this was more than 7 years ago, then this should have no effect on IHT.

The house was sold recently and my parents want to transfer around £200k to me.

When the house was sold you should have been legally entitled to one third of the value. I would have thought you would have just received this directly from the conveyancing solicitor as you owned one third of the property? Did this not happen for some reason? How much did the house sell for?

Many thanks for your response. 

Ah. In terms of HMRC viewing this as a gift, I thought that the seven years would start ticking now - when I receive the £200k? But you think it started ticking in 2005, when the property was purchased…?

The house was recently sold for around £600k.

My parents negotiated the sale of the property on our behalf and dealt directly with the solicitor, etc. I told them on numerous occasions that it would look much cleaner if my share of the proceeds was transferred directly from the solicitor. They failed to sort this out for some reason, and the full £600k was transferred to my parents. 

£200k is more than a quarter share so some of this is a second gift. 

There are four names on the title deeds (mum, dad, daughter, son), but my parents are counting themselves as a couple and splitting it into thirds. 

Hmmm. Do you think I am only legally entitled to a quarter? 

Thanks

The house is either owned as joint tenants or tenants in common and only in the latter form of ownership can the house be owned in uneven shares. This requires a deed of trust to be in place which documents how the ownership is split. If this was not put in place at the time of purchase then the default is you own it in equal shares and as there are 4 of you on the deeds then yes it is a 1/4 each.

There is also the issue of beneficial ownership as only two of the owners received the rental payments so a gift with reservation of benefit comes into play. This is far to complicated for you to get an answer from strangers on the internet the 4 of you need professional advice especially your parents who may have created a very complex IHT problem for themselves (or rather their executors).

Cosmo_Kramer

poseidon1 said:

Really can't see the confusion here.

In 2010 and assuming it was appropriately documented as such ( to be checked) your parents gifted to you 1/3 share of a property which has now sold for a gross amount of £600k  (Solicitors/ estate agents fees  to be deducted therefrom).

Ignore the fact parents received the entire proceeds you are legally entitled to 1/3rd.

Now each of  you are required to pay CGT  within 60 days of sale and you indicate you will be doing so.

Therefore from what you have said, if parents have given you a gross amount of £200k, the only 'gift' to you is 1/3rd of the solicitors and agents fees and other related costs, which you will see on the property sale completion statement.

In this regard presumably the accountant is calculating attributable gains based on third shares?

Your parents each have £3000 annual gift exemption so if they have not used this, the 1/3rd of property sales costs 'gifted' to you is comfortably covered within that exemption. Ergo no IHT exposure whatsoever, so don't concern yourself on that subject. 

I only wish your accountant had had sufficient presence of mind to have clearly explained this to you,  rather than the vague statement to ' build your case '.

Just an observation in passing, your parents failure to pass onto your brother the entirety of his 1/3rd share is messy.

Your brother has a personal CGT exposure on his  proceeds whether  he receives it or not. Are your parents purporting to pay this for him? Even if they do he  will still (in my view)  have a legal claim for the net difference after tax which I would maintain would become a debt on your parents estate, if they do not pay him during their lifetime.

Suggest they talk this through with their solicitor, since regardless of their  'trust issues' it does not sound like a sensible course of action.

Many thanks for your very helpful response. 

My brother lives abroad, and so the accountant has advised that he does not need to pay CGT.

I’ll definitely suggest to my parents that they should talk to their solicitor about my brother, as I agree that it is messy.  

poseidon1

Keep_pedalling said:

Cosmo_Kramer said:

Keep_pedalling said:

Cosmo_Kramer said:

Albermarle said:

These situations can be complicated but I would have thought that by paying for the house, but splitting the ownership three ways, they effectively gifted you and your brother one third of the property at that time. If this was more than 7 years ago, then this should have no effect on IHT.

The house was sold recently and my parents want to transfer around £200k to me.

When the house was sold you should have been legally entitled to one third of the value. I would have thought you would have just received this directly from the conveyancing solicitor as you owned one third of the property? Did this not happen for some reason? How much did the house sell for?

Many thanks for your response. 

Ah. In terms of HMRC viewing this as a gift, I thought that the seven years would start ticking now - when I receive the £200k? But you think it started ticking in 2005, when the property was purchased…?

The house was recently sold for around £600k.

My parents negotiated the sale of the property on our behalf and dealt directly with the solicitor, etc. I told them on numerous occasions that it would look much cleaner if my share of the proceeds was transferred directly from the solicitor. They failed to sort this out for some reason, and the full £600k was transferred to my parents. 

£200k is more than a quarter share so some of this is a second gift. 

There are four names on the title deeds (mum, dad, daughter, son), but my parents are counting themselves as a couple and splitting it into thirds. 

Hmmm. Do you think I am only legally entitled to a quarter? 

Thanks

The house is either owned as joint tenants or tenants in common and only in the latter form of ownership can the house be owned in uneven shares. This requires a deed of trust to be in place which documents how the ownership is split. If this was not put in place at the time of purchase then the default is you own it in equal shares and as there are 4 of you on the deeds then yes it is a 1/4 each.

There is also the issue of beneficial ownership as only two of the owners received the rental payments so a gift with reservation of benefit comes into play. This is far to complicated for you to get an answer from strangers on the internet the 4 of you need professional advice especially your parents who may have created a very complex IHT problem for themselves (or rather their executors).

Keep_pedalling note your comment re GROB ( gift with reservation of benefit).

 Certainly no GROB occurred  in 2010 in year of original gift when property occupied by parent's daughter. 

That said subsequent rental of the property with rent passing solely to the parents, to the exclusion of OP and brother would on the surface appear to raise the spectre of GROB potentially coming into play thereafter. 

However it is  suggested that a specific relieving provision  introduced in 1999  to the GROB rules may get the parents off the hook.

This is in the shape of  FA 1986 s102 (B) 3 (a). Briefly it states where a donor gifts an undivided share in land but does not occupy the property,  GROB will not apply even when some other benefit such as rental income is retained by the donor.  In some ways its a curious relief, applying as it does  to land only.

I agree  given OP's parents ages, there is a fair chance this issue could raise its head within the next 7 years, so parents should certainly explore the GROB issue with a suitably qualified lawyer ( it might not be the solicitor who handled the sale), and determine whether or not s102 (B) 3(a) provides the necessary protection from IHT exposure.

The CGT analysis is unaffected by the above. That will be whatever it should be depending on how the 2010 original gift was structured and documented, so hopefully the accountant is on the ball on this.

However, overall  there are definitely some legal T's to be crossed and I's dotted by OP's parents, on a range of issues including the separate point of their witholding  part of the son's de facto share of sale proceeds. So yes, parents have complexities (some self inflicted), to address.

mybestattempt

poseidon1 said:

Keep_pedalling said:

Cosmo_Kramer said:

Keep_pedalling said:

Cosmo_Kramer said:

Albermarle said:

These situations can be complicated but I would have thought that by paying for the house, but splitting the ownership three ways, they effectively gifted you and your brother one third of the property at that time. If this was more than 7 years ago, then this should have no effect on IHT.

The house was sold recently and my parents want to transfer around £200k to me.

When the house was sold you should have been legally entitled to one third of the value. I would have thought you would have just received this directly from the conveyancing solicitor as you owned one third of the property? Did this not happen for some reason? How much did the house sell for?

Many thanks for your response. 

Ah. In terms of HMRC viewing this as a gift, I thought that the seven years would start ticking now - when I receive the £200k? But you think it started ticking in 2005, when the property was purchased…?

The house was recently sold for around £600k.

My parents negotiated the sale of the property on our behalf and dealt directly with the solicitor, etc. I told them on numerous occasions that it would look much cleaner if my share of the proceeds was transferred directly from the solicitor. They failed to sort this out for some reason, and the full £600k was transferred to my parents. 

£200k is more than a quarter share so some of this is a second gift. 

There are four names on the title deeds (mum, dad, daughter, son), but my parents are counting themselves as a couple and splitting it into thirds. 

Hmmm. Do you think I am only legally entitled to a quarter? 

Thanks

The house is either owned as joint tenants or tenants in common and only in the latter form of ownership can the house be owned in uneven shares. This requires a deed of trust to be in place which documents how the ownership is split. If this was not put in place at the time of purchase then the default is you own it in equal shares and as there are 4 of you on the deeds then yes it is a 1/4 each.

There is also the issue of beneficial ownership as only two of the owners received the rental payments so a gift with reservation of benefit comes into play. This is far to complicated for you to get an answer from strangers on the internet the 4 of you need professional advice especially your parents who may have created a very complex IHT problem for themselves (or rather their executors).

Keep_pedalling note your comment re GROB ( gift with reservation of benefit).

 Certainly no GROB occurred  in 2010 in year of original gift when property occupied by parent's daughter. 

That said subsequent rental of the property with rent passing solely to the parents, to the exclusion of OP and brother would on the surface appear to raise the spectre of GROB potentially coming into play thereafter. 

However it is  suggested that a specific relieving provision  introduced in 1999  to the GROB rules may get the parents off the hook.

This is in the shape of  FA 1986 s102 (B) 3 (a). Briefly it states where a donor gifts an undivided share in land but does not occupy the property,  GROB will not apply even when some other benefit such as rental income is retained by the donor.  In some ways its a curious relief, applying as it does  to land only.

I agree  given OP's parents ages, there is a fair chance this issue could raise its head within the next 7 years, so parents should certainly explore the GROB issue with a suitably qualified lawyer ( it might not be the solicitor who handled the sale), and determine whether or not s102 (B) 3(a) provides the necessary protection from IHT exposure.

The CGT analysis is unaffected by the above. That will be whatever it should be depending on how the 2010 original gift was structured and documented, so hopefully the accountant is on the ball on this.

However, overall  there are definitely some legal T's to be crossed and I's dotted by OP's parents, on a range of issues including the separate point of their witholding  part of the son's de facto share of sale proceeds. So yes, parents have complexities (some self inflicted), to address.

There is also the issue of who was entitled to the rental income from 2012 as income follows beneficial ownership.

Depending on how the ownership was shared, then not only are the OP and her brother entitled to their respective shares of the sales proceeds (and liable for any CGT arising on the disposal of their shares) they were entitled to the same share of the rental income and liable for any income tax due on it.

The fact her parents received the all rental income needs to be reviewed, particularly as the son/brother appears to be non UK resident.

poseidon1

Cosmo_Kramer said:

poseidon1 said:

Really can't see the confusion here.

In 2010 and assuming it was appropriately documented as such ( to be checked) your parents gifted to you 1/3 share of a property which has now sold for a gross amount of £600k  (Solicitors/ estate agents fees  to be deducted therefrom).

Ignore the fact parents received the entire proceeds you are legally entitled to 1/3rd.

Now each of  you are required to pay CGT  within 60 days of sale and you indicate you will be doing so.

Therefore from what you have said, if parents have given you a gross amount of £200k, the only 'gift' to you is 1/3rd of the solicitors and agents fees and other related costs, which you will see on the property sale completion statement.

In this regard presumably the accountant is calculating attributable gains based on third shares?

Your parents each have £3000 annual gift exemption so if they have not used this, the 1/3rd of property sales costs 'gifted' to you is comfortably covered within that exemption. Ergo no IHT exposure whatsoever, so don't concern yourself on that subject. 

I only wish your accountant had had sufficient presence of mind to have clearly explained this to you,  rather than the vague statement to ' build your case '.

Just an observation in passing, your parents failure to pass onto your brother the entirety of his 1/3rd share is messy.

Your brother has a personal CGT exposure on his  proceeds whether  he receives it or not. Are your parents purporting to pay this for him? Even if they do he  will still (in my view)  have a legal claim for the net difference after tax which I would maintain would become a debt on your parents estate, if they do not pay him during their lifetime.

Suggest they talk this through with their solicitor, since regardless of their  'trust issues' it does not sound like a sensible course of action.

Many thanks for your very helpful response. 

My brother lives abroad, and so the accountant has advised that he does not need to pay CGT.

I’ll definitely suggest to my parents that they should talk to their solicitor about my brother, as I agree that it is messy.  

Now I have to question the competency of the accountant, and their fitness to continue with the family CGT compliance. Non UK residents have been liable to CGT on UK residential land since 2019 - see article below from BDO and  click on the disposal tab

https://www.bdo.co.uk/en-gb/insights/tax/private-client/tax-implications-for-non-residents-holding-uk-property

As intimated in the article, and depending on how long your brother was non UK resident, he may be able to make a claim to revalue his 1/3rd share of the property as at April 2019,  so that only gains accruing since then are taxable in his case.

However, the fact the accountant was blissfully unaware of your brother's tax exposure, suggests you should be seeking the alternative services of a Chartered Tax  Accountant ( a member of the ICAEW) with appropriate expertise in Non UK resident tax issues. 

 The clock is ticking on the 60 day period to pay the tax, so I would not delay finding another accountant.

It is sad your parent's investment property has thrown up so many tax issues, even sadder that they may not have appropriately qualified professionals on hand with the competency to untangle the complexities.

poseidon1

mybestattempt said:

poseidon1 said:

Keep_pedalling said:

Cosmo_Kramer said:

Keep_pedalling said:

Cosmo_Kramer said:

Albermarle said:

These situations can be complicated but I would have thought that by paying for the house, but splitting the ownership three ways, they effectively gifted you and your brother one third of the property at that time. If this was more than 7 years ago, then this should have no effect on IHT.

The house was sold recently and my parents want to transfer around £200k to me.

When the house was sold you should have been legally entitled to one third of the value. I would have thought you would have just received this directly from the conveyancing solicitor as you owned one third of the property? Did this not happen for some reason? How much did the house sell for?

Many thanks for your response. 

Ah. In terms of HMRC viewing this as a gift, I thought that the seven years would start ticking now - when I receive the £200k? But you think it started ticking in 2005, when the property was purchased…?

The house was recently sold for around £600k.

My parents negotiated the sale of the property on our behalf and dealt directly with the solicitor, etc. I told them on numerous occasions that it would look much cleaner if my share of the proceeds was transferred directly from the solicitor. They failed to sort this out for some reason, and the full £600k was transferred to my parents. 

£200k is more than a quarter share so some of this is a second gift. 

There are four names on the title deeds (mum, dad, daughter, son), but my parents are counting themselves as a couple and splitting it into thirds. 

Hmmm. Do you think I am only legally entitled to a quarter? 

Thanks

The house is either owned as joint tenants or tenants in common and only in the latter form of ownership can the house be owned in uneven shares. This requires a deed of trust to be in place which documents how the ownership is split. If this was not put in place at the time of purchase then the default is you own it in equal shares and as there are 4 of you on the deeds then yes it is a 1/4 each.

There is also the issue of beneficial ownership as only two of the owners received the rental payments so a gift with reservation of benefit comes into play. This is far to complicated for you to get an answer from strangers on the internet the 4 of you need professional advice especially your parents who may have created a very complex IHT problem for themselves (or rather their executors).

Keep_pedalling note your comment re GROB ( gift with reservation of benefit).

 Certainly no GROB occurred  in 2010 in year of original gift when property occupied by parent's daughter. 

That said subsequent rental of the property with rent passing solely to the parents, to the exclusion of OP and brother would on the surface appear to raise the spectre of GROB potentially coming into play thereafter. 

However it is  suggested that a specific relieving provision  introduced in 1999  to the GROB rules may get the parents off the hook.

This is in the shape of  FA 1986 s102 (B) 3 (a). Briefly it states where a donor gifts an undivided share in land but does not occupy the property,  GROB will not apply even when some other benefit such as rental income is retained by the donor.  In some ways its a curious relief, applying as it does  to land only.

I agree  given OP's parents ages, there is a fair chance this issue could raise its head within the next 7 years, so parents should certainly explore the GROB issue with a suitably qualified lawyer ( it might not be the solicitor who handled the sale), and determine whether or not s102 (B) 3(a) provides the necessary protection from IHT exposure.

The CGT analysis is unaffected by the above. That will be whatever it should be depending on how the 2010 original gift was structured and documented, so hopefully the accountant is on the ball on this.

However, overall  there are definitely some legal T's to be crossed and I's dotted by OP's parents, on a range of issues including the separate point of their witholding  part of the son's de facto share of sale proceeds. So yes, parents have complexities (some self inflicted), to address.

There is also the issue of who was entitled to the rental income from 2012 as income follows beneficial ownership.

Depending on how the ownership was shared, then not only are the OP and her brother entitled to their respective shares of the sales proceeds (and liable for any CGT arising on the disposal of their shares) they were entitled to the same share of the rental income and liable for any income tax due on it.

The fact her parents received the all rental income needs to be reviewed, particularly as the son/brother appears to be non UK resident.

I don't believe it would  be entirely necessary to re-open the rent position between the parties.

It is perfectly acceptable for owners of jointly owned property to reallocate between themselves who will benefit from the rents, without that reallocation affecting their underlying beneficial capital rights. Just so long as the rents are properly declared and tax is paid by the owners who elect to divert all income to themselves. See below a useful discourse on this issue in the STEP trust discussion forum ( Malcolm Finney's comments especially) - 

https://trustsdiscussionforum.co.uk/t/rental-income-taken-solely-by-one-of-two-tenants-in-common/4053

 Ideally however, such an arrangement would be properly documented in case of an HMRC enquiry.

mybestattempt

poseidon1 said:

mybestattempt said:

poseidon1 said:

Keep_pedalling said:

Cosmo_Kramer said:

Keep_pedalling said:

Cosmo_Kramer said:

Albermarle said:

These situations can be complicated but I would have thought that by paying for the house, but splitting the ownership three ways, they effectively gifted you and your brother one third of the property at that time. If this was more than 7 years ago, then this should have no effect on IHT.

The house was sold recently and my parents want to transfer around £200k to me.

When the house was sold you should have been legally entitled to one third of the value. I would have thought you would have just received this directly from the conveyancing solicitor as you owned one third of the property? Did this not happen for some reason? How much did the house sell for?

Many thanks for your response. 

Ah. In terms of HMRC viewing this as a gift, I thought that the seven years would start ticking now - when I receive the £200k? But you think it started ticking in 2005, when the property was purchased…?

The house was recently sold for around £600k.

My parents negotiated the sale of the property on our behalf and dealt directly with the solicitor, etc. I told them on numerous occasions that it would look much cleaner if my share of the proceeds was transferred directly from the solicitor. They failed to sort this out for some reason, and the full £600k was transferred to my parents. 

£200k is more than a quarter share so some of this is a second gift. 

There are four names on the title deeds (mum, dad, daughter, son), but my parents are counting themselves as a couple and splitting it into thirds. 

Hmmm. Do you think I am only legally entitled to a quarter? 

Thanks

The house is either owned as joint tenants or tenants in common and only in the latter form of ownership can the house be owned in uneven shares. This requires a deed of trust to be in place which documents how the ownership is split. If this was not put in place at the time of purchase then the default is you own it in equal shares and as there are 4 of you on the deeds then yes it is a 1/4 each.

There is also the issue of beneficial ownership as only two of the owners received the rental payments so a gift with reservation of benefit comes into play. This is far to complicated for you to get an answer from strangers on the internet the 4 of you need professional advice especially your parents who may have created a very complex IHT problem for themselves (or rather their executors).

Keep_pedalling note your comment re GROB ( gift with reservation of benefit).

 Certainly no GROB occurred  in 2010 in year of original gift when property occupied by parent's daughter. 

That said subsequent rental of the property with rent passing solely to the parents, to the exclusion of OP and brother would on the surface appear to raise the spectre of GROB potentially coming into play thereafter. 

However it is  suggested that a specific relieving provision  introduced in 1999  to the GROB rules may get the parents off the hook.

This is in the shape of  FA 1986 s102 (B) 3 (a). Briefly it states where a donor gifts an undivided share in land but does not occupy the property,  GROB will not apply even when some other benefit such as rental income is retained by the donor.  In some ways its a curious relief, applying as it does  to land only.

I agree  given OP's parents ages, there is a fair chance this issue could raise its head within the next 7 years, so parents should certainly explore the GROB issue with a suitably qualified lawyer ( it might not be the solicitor who handled the sale), and determine whether or not s102 (B) 3(a) provides the necessary protection from IHT exposure.

The CGT analysis is unaffected by the above. That will be whatever it should be depending on how the 2010 original gift was structured and documented, so hopefully the accountant is on the ball on this.

However, overall  there are definitely some legal T's to be crossed and I's dotted by OP's parents, on a range of issues including the separate point of their witholding  part of the son's de facto share of sale proceeds. So yes, parents have complexities (some self inflicted), to address.

There is also the issue of who was entitled to the rental income from 2012 as income follows beneficial ownership.

Depending on how the ownership was shared, then not only are the OP and her brother entitled to their respective shares of the sales proceeds (and liable for any CGT arising on the disposal of their shares) they were entitled to the same share of the rental income and liable for any income tax due on it.

The fact her parents received the all rental income needs to be reviewed, particularly as the son/brother appears to be non UK resident.

I don't believe it would  be entirely necessary to re-open the rent position between the parties.

It is perfectly acceptable for owners of jointly owned property to reallocate between themselves who will benefit from the rents, without that reallocation affecting their underlying beneficial capital rights. Just so long as the rents are properly declared and tax is paid by the owners who elect to divert all income to themselves. See below a useful discourse on this issue in the STEP trust discussion forum ( Malcolm Finney's comments especially) - 

https://trustsdiscussionforum.co.uk/t/rental-income-taken-solely-by-one-of-two-tenants-in-common/4053

 Ideally however, such an arrangement would be properly documented in case of an HMRC enquiry.

Thank you, it's always interesting to read and consider the views of others.

However, based on my reading of their official guidance I don't think HMRC would necessarily accept an agreed reallocation of rental income based on receipt:

https://www.gov.uk/hmrc-internal-manuals/trusts-settlements-and-estates-manual/tsem9310

On the basis of entitlement to the rental income the OP and her brother have diverted income to their parents and the agreement to do so maybe caught by the relevant anti-avoidance legislation.

I believe it's another element of the overall tax position which needs to be considered.


This is yet another thread where it's become clear that the very best intentions of generous parents now need to be untangled, as you have said, by appropriately qualified professionals to ensure correct tax compliance.