Please Help - Tax Dodging Issue

FatJock

Hello Guy's,

wonder if anyone can advise on this problem. I've already posted this on the DFW forum and have had some responses but have been advised that you chaps may be in a better position to advise.

OH's dad appears to have been a bit naughty with his tax returns over the past few years and Inland Revenue are looking into his books and business dealings. Both she and her mum are joint owners of the house we live in (50/50 mortgage - father is not involved with this). Her mum is in business with her dad and therefore a partner.

OH is worring that the tax man may force her mum to sell the house to cover any fine that her dad may potentially receive (which he would not be able to pay even if he sold the business). The mother was unaware of what has been going on and has kept out of the fathers side of the business dealings.

Can anyone advise me if there is a danger we could lose the house. Both Mother and Daughter would be devastated if this was the case.

Can the tax man seek monies through her mother for the stupidity of her dad? What are our options? Can the mother sign the house over to her daughter and make her sole owner of the property? Would there be any issues with this approach?

Please Note - although her dad has been dodging the tax I am not suggesting we are trying to aid him. Just want to ensure we keep the house we have put some much work and time into. Our mortgage is now very low and we where hoping to stay here for a number of years yet whilst we start a family.

As always, any advice greatly appreciated.

Regards and thanks in advance

FatJock

Bean_Counter

As the mother is a partner in the business (assuming not a limited company), she is jointly & severally liable for the debts of the business. As such the house could be at risk. However I would think that it would be an extreme matter if this was the case.

My initial advice would be to make sure that you have a good accountant working with OH Dad to deal with the tax investigation. They will be able to work with HMRC and OH Dad to mitigate any eventual tax bill and penalties that arise.

You need to get an idea of how much the final bill will be before you panic. Since there is equity in the house, if the worst came to the worst, OH Mum could use that to raise money to pay off HMRC and keep a roof over your head.

FatJock

Beancounter,

Thank you for the swift response, but could I pose another question please?

Would it be possible for the mother to transfer her share in the house over to her daughter (possibly as a gift) and make her sole owner of the property therefore removing the possibility of the house been viewed as an asset that could be sold?

Is this possible and if so what are the potential risks?

We are obviously going to be seeking legal advice on this but want to gain some knowledge before doing so.

Thanks again,
FatJock

Bean_Counter

FatJock wrote: »

Would it be possible for the mother to transfer her share in the house over to her daughter (possibly as a gift) and make her sole owner of the property therefore removing the possibility of the house been viewed as an asset that could be sold?

Sorry, but that is not my area of expertise. Hopefully someone more knowledgeable will come along.

My gut feeling is that there is likely to be some sort of anti-avoidance measure in place.

I think though when things get this erious then going to see a solicitor is the right thing to do.

CLAPTON

if the worst came to the worst, the HMRC would bankrupt your parents.
As part of the bankruptcy process all recent assett disposals would be investigated and 'undone' unlesss a fair price was paid for the assett.

jamesd

Which means: wait until there is a clear property price drop and then consider buying the 50% off the mother with a mortgage.

HMRC have a scheme where you can deposit money with them to use against tax liabilities. Interest not due on tax bills covered by the deposited amounts from the time of the deposit. It might be worth starting to make regular deposits each month from all excess income they have to show that they are keen to resolve the problem properly. Perhaps a significant chunk of savings also. See Certificates Of Tax Deposit. Partnerships can do it for partnership liabilities, individual partners can do it for their own.

Trying_to_be_good

I would think buying OH Mum out of her share of the house is the best option (if she's chased for money by HMRC they will have a way to reverse a gift or reduced price deal, so this should be done at market value).

Does/has OH Mum lived in the house? There may be a Capital Gains Tax liability if she has owned it as an investment rather than as her home.