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Where Taxpayers and Advisers Meet

Personal Property “Loan” what paperwork is needed?

Enq
Posts: 4
Joined: Wed Aug 06, 2008 3:43 pm

Personal Property “Loan” what paperwork is needed?

Postby Enq » Sat Feb 21, 2015 5:07 pm

My partner purchased a house in 2003 my parents loaned him 25k but named us both on the agreement as jointly liable individuals 25K – we signed a formal loan agreement from solicitors agreeing to pay 8% interest P/a until repaid. We rented rooms in that property paid tax etc and deducted the interest that we were charged on his tax return.

In 2006 I subsequently purchased a new house and my partner transferred to me (Not in writing) a sum of 25K which I consider to be my parents original loan monies - and they again gave me a further advance of 19364.00 two days before the purchase. on both figures I retained the same terms as above and paid them the interest myself since that date. I have let this property since then and declare their interest on my Tax return each year.

What document do I need to draw up in order to make this legal for tax reasons both for my partner's time if required, and more importantly now for myself? as my loan agreement does not say anything about either the property or the address.

Thank you for your help

Ian McTernan CTA
Posts: 1232
Joined: Wed Aug 06, 2008 3:02 pm
Location: Bedford
Contact:

Re: Personal Property “Loan” what paperwork is needed?

Postby Ian McTernan CTA » Tue Feb 24, 2015 2:38 pm

I assume your parents have reported the income on their tax returns since 2003, as they are receiving untaxed interest on which they are liable to pay income tax. If they aren't, then they should be. If the Revenue did an enquiry in to your rental income they would certainly check this.

Without seeing the agreement it is difficult to be sure, but it sounds more like an unsecured loan taken out by you both from your parents.

You need to draw up some paperwork transferring the loan to yourself from jointly liable. You need to establish for tax purposes that the loan money was used in the purchase of the property. I'm not sure what the £25k transfer from your partner was for as it was not documented, and without that he still owes your parents the money (and the loan isn't on your property and might not be allowed).
McTernan Associates Ltd
Chartered Tax Advisers
Bedford
Email through link on website:
http://www.imcternan.com

section 44
Posts: 4468
Joined: Thu Oct 30, 2008 12:47 pm

Re: Personal Property “Loan” what paperwork is needed?

Postby section 44 » Tue Feb 24, 2015 3:47 pm

and the loan isn't on your property
what does this mean?

Enq
Posts: 4
Joined: Wed Aug 06, 2008 3:43 pm

Re: Personal Property “Loan” what paperwork is needed?

Postby Enq » Tue Feb 24, 2015 8:15 pm

thank you for your reply - yes they have declared the income on their returns, i will look at the agreement and provide you with some further clarification on the points you raised?


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