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Pre-owned asset tax - advice please
merlinthehappypig
Posts: 1,106 Forumite
in Cutting tax
Hopefully someone can help with this. I've had a good search on the forums, but whilst I can find reference to this tax, I can't pin down exactly how it applies to us (or not).
The HMRC site has a section on it, but it's impossible to cut through the detail to make sense.
My parents in law have sold their house & have, at least temporarily, gifted the money raised to my wife. The plan was that we would buy somewhere big enough for all of us as they are no longer able to care for themselves. It's on hold at present due to my FIL's serious illness and may now not happen, but I'm trying to dot all the i's & cross the t's before doing anything else.
Despite their estate, should they die, being well under the IHT threshold I have a feeling that we might get caught under the pre-owned assets tax (POAT) unless we are careful.
My understanding is that, if they gift us any of the money from the sale of their house, we use that to help buy a house and they live with us, then POAT might apply unless they pay full market rent for their share.
From reading about this it appears that it is a relatively simple matter to complete form IHT 500 to elect for the money to remain within their estate for IHT purposes. Their entire estate is only worth about £200000 so that isn't an issue.
I'm going to take proper advice on this, but would appreciate any comments about whether or not POAT would apply in these circumstances and whether my understanding of the situation is correct before seeking this advice.
I don't want to rock the taxman's boat if we don't need to, but neither do I want a large and unwelcome tax bill some way down the line.
It seems to me that a lot of people will get caught out by this tax who correctly think that their estate is free from IHT, but have no idea that this tax has been introduced. It's unlikely to catch the IHT dodgers for whom it was set up, just a lot of other people who have innocently been trying to help out relatives in their old age.
The HMRC site has a section on it, but it's impossible to cut through the detail to make sense.
My parents in law have sold their house & have, at least temporarily, gifted the money raised to my wife. The plan was that we would buy somewhere big enough for all of us as they are no longer able to care for themselves. It's on hold at present due to my FIL's serious illness and may now not happen, but I'm trying to dot all the i's & cross the t's before doing anything else.
Despite their estate, should they die, being well under the IHT threshold I have a feeling that we might get caught under the pre-owned assets tax (POAT) unless we are careful.
My understanding is that, if they gift us any of the money from the sale of their house, we use that to help buy a house and they live with us, then POAT might apply unless they pay full market rent for their share.
From reading about this it appears that it is a relatively simple matter to complete form IHT 500 to elect for the money to remain within their estate for IHT purposes. Their entire estate is only worth about £200000 so that isn't an issue.
I'm going to take proper advice on this, but would appreciate any comments about whether or not POAT would apply in these circumstances and whether my understanding of the situation is correct before seeking this advice.
I don't want to rock the taxman's boat if we don't need to, but neither do I want a large and unwelcome tax bill some way down the line.
It seems to me that a lot of people will get caught out by this tax who correctly think that their estate is free from IHT, but have no idea that this tax has been introduced. It's unlikely to catch the IHT dodgers for whom it was set up, just a lot of other people who have innocently been trying to help out relatives in their old age.
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