This is well outside my appreciation for any anti-avoidance rules that may apply and I should be most appreciative of any comments.
An individual, X, has a furnished holiday let, which has a 57% mortgage.
A relative, R, is going to give/lend them some money.
X has a child, C.
R will give/lend the cash to C, interest free. C will on-lend this to X against X's holiday let. C obtains interest income offsettable against personal allowance, X obtains tax deduction against FHL business, at 40%. As this is (to use a corporate term) mezzanine debt (second mortgage/bridging loan/effective equity) obviously a reasonably high interest rate, say 10%, will apply. C spends income on school fees.
I guess this might be annual interest, so would there be a need to withhold income tax? By making it repayable on demand do we get around this?
Thoughts? Many thanks.
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