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Where Taxpayers and Advisers Meet

Gift or Loan?

Generix
Posts:2532
Joined:Wed Aug 06, 2008 3:41 pm
Re: Gift or Loan?

Postby Generix » Tue Aug 30, 2011 1:17 pm

Incredulum's posts on this forum never fail to keep me entertained at work :D

(for avoidance of doubt this isn't criticism, but praise!!)
Do you adore to transfer your artistic and inventive qualities to renovate a part type? Perhaps your friends who tour your sanctuary head remarks about want they could levy you to change their premises.

maths
Posts:8507
Joined:Wed Aug 06, 2008 3:25 pm

Re: Gift or Loan?

Postby maths » Tue Aug 30, 2011 2:30 pm

If it is perceived by the donor as a gift{loan] then it is a gift[loan], irrespective of whetehr or not the donee perceives it as a loan[gift] because there would not be a legal obligation to repay and the donee is wrong in his understanding (and vice versa).
Absolutely not.

The facts and not one individual's perception determines the nature of the transaction.

X advances cash to Y. X states that it is a loan. No documentation is prepared. No date of repayment is agreed; no rate of interest is specified; no repayment schedule is set out. Over subsequent months/years no actual repayments are made.

X at some point demands repayment. Y alleges that X had gifted the monies.

On these facts it is highly likely that it would be deemed that a gift had been made and the perception of X that it was a loan, whilst a factor, is not a determining one (i am ignoring the presumption of advancement which would, depending upon relationship between X and Y, be another factor suggesting gift not loan).

Incredulum
Posts:2795
Joined:Thu Dec 03, 2009 5:35 pm

Re: Gift or Loan?

Postby Incredulum » Tue Aug 30, 2011 2:49 pm

Incredulum's posts on this forum never fail to keep me entertained at work :D
Me too. 8-)

maths
Posts:8507
Joined:Wed Aug 06, 2008 3:25 pm

Re: Gift or Loan?

Postby maths » Tue Aug 30, 2011 3:01 pm

No modesty there then!!

Incredulum
Posts:2795
Joined:Thu Dec 03, 2009 5:35 pm

Re: Gift or Loan?

Postby Incredulum » Tue Aug 30, 2011 3:02 pm

Eh? Posting keeps me entertained in the dull moments.

Kerensab
Posts:2
Joined:Fri Sep 29, 2017 2:34 pm

Re: Gift or Loan?

Postby Kerensab » Fri Sep 29, 2017 2:42 pm

I see this is a really old thread, but hoping someone is still watching! My mother passed away on Dec 24th 2016. In November 2015 she gave me £200k to help me buy a house. We had vague discussions about me paying it back when my business got off the ground, maybe in a year or 2, but there was no formal agreement, payment term or amounts, Or even a fixed time to start paying it back. It just never got brought up again. Quite common in out family. Now however the trustees are asking me whether it was a loan or a gift and I am extremely confused over what I should declare it as. At the time of her passing it was still in gift mode, but by this time I am sure we would have set yup some kind of payment plan. Which is the better option for me, and what will cost me personally less in tax?

thanks for any advice.

someone
Posts:692
Joined:Mon Feb 13, 2017 10:09 am

Re: Gift or Loan?

Postby someone » Sun Oct 01, 2017 8:02 am

I would say it sounds like a loan. Pay it back when you can isn't a gift, it's a loan on very favourable terms.

I don't think in this case it will make any difference to the total tax due but it might affect who has to pay it.

Eg. Estate worth 600k (Inc gift/loan), three beneficiary. Equal shares.

Gift: IHT on 250K (600-350) = 100K. 400K in estate means 100K each ( you get 300K Inc gift others get 100K)
Loan IHT on 250K. 600k in estate so 167K each. You will need to repay 33K of the loan.

maths
Posts:8507
Joined:Wed Aug 06, 2008 3:25 pm

Re: Gift or Loan?

Postby maths » Sun Oct 01, 2017 3:22 pm

It would seem like a loan was intended. If in due course you were able to repay then presumably you would have done so. Equally if you never got into the position to repay mother she may have in fact waived any need to repay.

However, you could probably argue the contrary ie a gift.

What is the size of mother's estate assuming you don't repay the 200k?

Is father alive and if not did he leave his estate to mother?

Has mother left her house to anyone?

Kerensab
Posts:2
Joined:Fri Sep 29, 2017 2:34 pm

Re: Gift or Loan?

Postby Kerensab » Tue Oct 17, 2017 11:17 am

Father is not alive, the estate is in a bit of a mess as she left everything to her husband since he is not a UK resident, and they owned property jointly. It was all left to him, and he is now trying to figure out how to give it to myself and my sister as that was my mothers wish. It appears that there is very little cash in the estate, £60,000 approx.


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