Advise on how to avoid 'gift with reservation of benefit'

[rocky4j]

Hello!

I am looking for some advise.

My parents are looking to transfer their property into my name as they would like to reduce any taxes that may occur later on. The situation is that I live at home with my parents and if they moved the property into my name they would too continue to live there.

But reading from quite a few posts 'gift with reservation of benefit' becomes a problem! The HMRC websites states that this 'gift with reservation of benefit' is avoided if my parents paid rent to me at market value. How is this proved to HMRC in the event of my parents death that this was ever paid? Could I value my own rent for 1 room and then request my parents to pay £x for 1 room? Could I transfer £x money to them and they would then transfer that £x back to me as rent?

Also if my parents had to go in a care home would the property which is no longer in their name be used as capital with the 'gift with reservation of benefit' policy?

Any advise would be great!

[pqtaxation]

... reading from quite a few posts 'gift with reservation of benefit' becomes a problem! The HMRC websites states that this 'gift with reservation of benefit' is avoided if my parents paid rent to me at market value. How is this proved to HMRC in the event of my parents death that this was ever paid? Could I value my own rent for 1 room and then request my parents to pay £x for 1 room? Could I transfer £x money to them and they would then transfer that £x back to me as rent?

Any advise (sic advice) would be great!

You have an incorrect understanding of the benefit retained by your parents.

My suggestion is for your parents to get professional advice on planning for the totality of their estate (usually from a specialist solicitor especially if they don't have wills) and forget for the moment such a transfer.

[rocky4j]

pqtaxation - Thanks for the reply. I will get some time booked with a specialist solicitor) Do you recommend anyone? Ideally in London.

Thanks

[pqtaxation]

London is a big place and so there is plenty of choice.

2 easy-to-use tools to find such specilists are:

private client (formerly probate) section members of Law Society

http://www.probatesection.org.uk/pages/search/home


members of STEP - society of trust and estate practioners most of whom are also lawyers

http://www.step.org/system_pages/call_t ... eader-menu

[maths]

It is possible for your parents to transfer their beneficial interest in the property to you and avoid the GWR provisions by paying a market rent; if, for example, they only occupied say a granny annex attached to the property the market rent would reflect that applicable to the annex only (not the whole house).

Another option (as you live there) is for them to gift, say, 60/70% to you whilst they retain the balance. Expenses would be split effectively 50/50; the important point is that they must bear at least 50% so they receive no benefit from you.

On death they would only own 40/30% which would then be discounted helping their IHT liability.

No adverse CGT implications arise.

[jubs]

But what people want to know are how these rules are enforced. It's all well and good stating a rule, but only an idiot wouldn't question its enforcability or scope for abuse. It seems HMRC like to make rules that have inherent grey areas and hope the little man caves in when they question his intent. Intent should be irrelevant as this stems from emotion and not fact. Fact cannot be in question.

Anyway so could someone explain how HMRC can disprove that the expenses weren't shared 50/50?

Also what about the rent, it could be paid in cash, how then can HMRC prove Rocky didn't receive rent....if both Rocky and his parents say the rent transaction occured by cash?

I find it stupid that HMRC have rules like this, connected parties can simply collude against the taxman because of the inherent trust between them, that is never present when dealing with a stranger. Connected persons who are close may wish to act as one unit, having no financial divide, hence hunting for taxes here is almost as incredulous as a law taxing someone for selling something to themselves...

[maths]

But what people want to know are how these rules are enforced.

Says who?

You mean that's what you want; haven't seen any proof to support your statement.

I'm only interested in facts not speculation.

[jubs]

Haha what a troll!!

Oh dear, I generalised, naughty me! People like to be successful. People want to be happy. People dislike trolls. Then again only a panties-in-a-twist man would think that I'm stating facts.

In fact that sentence backs up precisely what I'm saying. A lot of these rules appear to be based on grey-areas or intent or judged by someones moral compass...so the best way to correct me on this would be to answer the two questions in my previous post. At least that would be a constructive response! And seeing as you don't let subjectively cloud your judgement, I'd be honoured to hear your thoughts. Unless of course, you'd rather take a dislike to me and my posts!

[maths]

Unless of course, you'd rather take a dislike to me and my posts!

Like or dislike is irrelevant.

I've answered the original query. I'm not interested in wasting my time with spurious follow-up queries; others may choose to humour you.

[jubs]

Is this high-minded arrogance? Spurious, humour me, etc? They were serious points I was making...instead I get a huffy response. You were more than happy to waste your time replying initially to me, in such an unhelpful manner. Why?

It feels like you're taking this stance because you wish to deflect the points I raised, by claiming them to be spurious. This is worse than being a Catholic and questioning the priest about something in the Bible. I don't care, hopefully others here are more open to discuss matters.