Want to repay loan - please help!!

hoppalong_2

8 years ago borrowed £13000 from daughter (minor at time) to buy property for my widowed mother. Seemed like a good investment and would solve some of the family problems at same time. Cost of property at that time was £60000 (no mortgage). Always thought of the property as being part owned by daughter but name not put on deeds at time and the years have just gone. Would now like to correct this and add my daughter (adult) to the deeds for the percentage she paid at time. Property now worth approx £130000. Can I just go ahead and do this with a solicitor or are there are tax implications? At this point my assets are way below any inheritance tax. Widowed mother has been paying rent to me on the property as she was entitled to claim benefits.

Alternatively I could just give money back to my daughter with interest? Can I do this?

What's best to do??

Would be really grateful for advice of how to go about sorting this out.

Mikeyorks

hoppalong wrote: »

What's best to do??

Consult your daughter .... as you say she's now an adult. It should surely be her decision?

You can repay the 'loan' - or you can (deed of) gift her part of the property (and an appropriate proportion of the rent). You'll sensibly use a Solicitor for the latter.

hoppalong_2

Just wondered if anyone else had any advice.
Thanks

CLAPTON

if the house is owned by you but you're not living in it, then giving your daughter a share will involve you in CGT

jimmo

The key question is not who’s name is on the deeds, but who are the beneficial owners.
First impressions are that as you, personally bought the house 8 years ago, putting your daughter on the deeds now will constitute a gift to her now, attracting Capital Gains Tax for you on the increase in value of her proportion.
You could argue that your daughter has had a beneficial interest of 13/60 since the day it was bought and that putting her on the deeds now is simply recording the reality. In which case there will be no Capital Gains consequences now and nothing to report to the taxman.
Probably then the first time the taxman will become involved is when you sell the house after your mother passes on. You would then have to declare 47/60 of the gain and your daughter 13/60.
Questions that will arise then will include:
How come a minor child had £13,000 to lend to you, or invest in property?
Who made the decision to make her funds available by loan to you or for her investment and was the decision made at the time in her best interests?
Where did you get £47,000 from for your investment?
What happened to your daughter’s share of the rent?
I believe, but don’t definitely know, that even for the years when she was a minor and her share of the rent is counted as your for tax purposes, then whoever was responsible for her financial affairs still had to ensure that her net income was managed/ invested in her own interests.
As your mother is paying you rent and claiming benefit I believe that you will have had to put into place a formal lease, probably in conjunction with a fair rent assessment by the local authority.
You really need to look at what was set up then to judge what is the best way forward. If one solicitor acted for you to buy the house and set up your mother’s lease he is probably the best able to advise you what to do now.