POAT/GROB and Gifts

[JackieP]

My mother gave me £80k as a cash gift towards buying a house with a view to moving in with me in 2002. The purchase price for the house was £285k. We moved in and then she sold her house which was her primary residence. We share all household expenses and maintenance of the residence except the mortgage which I pay. The house is solely in my name.

My question is would this gift be liable to POAT or a GROB as she is still receiving benefit from the gift? She is on a basic pension so any tax payable would need to come from her savings

If as I suspect she would be liable how would the liability be calculated

[bob.fraser@towrylaw.]

I suspect that it would be a GROB, as I believe that the gift and the house purchase are associated operations.
However, the more important issue is whether is actually matters. Does your mother have any other capital other than the £80,000 she gave you and , if so, how much? If her total wealth, including the £80,000, is less than £275,000, then your question (and my answer) is academic since she is not liable for IHT anyway (provided she hasn't made any other significant gifts in the past 7 years)

[Lee Young]

It should not be a GROB as the rules do not allow tracing through gifts of cash.

Even so, as Bob says, it may not matter. At worst - if the Revenue establish a pre-ordained plan to use the money for the purchase of the property (which looks fairly likely on your words - "with a view to moving in with me") - she would be deemed to have reserved a benefit in a 80/285 share of the property, and if this and her other assets fall within the nil rate band then no IHT to pay.

If it is a GROB then it can not be subject to POAT.

If it is not a GROB, then it will be subject to POAT - but again if her estate , including her "share" of the prtoperty, is within the nil rate band, simply elect for IHT treatment to ensure there are no POAT income tax liabilities to pay.

[bob.fraser@towrylaw.]

Lee, the reason I beleive it may be a GROB is that GROB tracing provisions in FA 1986 Sch 20 para 2 do not apply where the original gift is cash, EXCEPT where the transaction can be shown to be a GWR by associated operations of the purchased property.

Bob

[JackieP]

Sorry - forgot to mention that my mother is over the IHT threshold.

Thanks for the comments so far