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Where Taxpayers and Advisers Meet

Personal Allowance

Joined:Thu Jul 09, 2015 5:07 pm
Personal Allowance

Postby logistic » Sat Sep 14, 2019 9:43 pm

Would this plan be valid ? My two grandsons are 16 and 13 respectively and are at a fee paying school. In due course they will go on to university. To ease the financial burden on their parents, I envisage purchasing a property in the boy’s names that will attract a substantial rent. As the boys would be the owners and landlords of the property and receive the rent, we anticipate that their tax free personal allowance will amply cover the tax liability on the rent received; this would make be a significant contribution to their education right through to university graduation.

As they will not begin to earn until they are in their twenties it means that tax on the rent would be covered for several years. I appreciate that my gift would be subject to the 7 year rule, but I am young enough for this to be only a minor risk. We are also aware that an adult would need to participate in holding the property until the elder boy is 18

My main concern is to be sure that this arrangement will not be successfully challenged by HMRC as tax evasion when their self-assessments are submitted. Currently their combined personal allowances would be £25,000 yearly,

Joined:Fri Jun 01, 2012 10:11 am

Re: Personal Allowance

Postby strawn » Sat Sep 14, 2019 10:02 pm

"my gift would be subject to the 7 year rule, but I am young enough for this to be only a minor risk."

It would be even more minor if you bought life insurance.

Who is going to manage the property?

Why is a property a better bet than an investment portfolio? Especially as it would be far simpler for the boys to have a separate portfolio each.
Unwinding a house owned jointly could be a pain in the pinny.

"challenged by HMRC as tax evasion": I don't see how. A gift is a gift as long as it is not a gift with reservation of benefits.

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