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Where Taxpayers and Advisers Meet

Gift without reservation

anjo56
Posts:36
Joined:Wed Nov 29, 2017 8:27 pm
Gift without reservation

Postby anjo56 » Wed Nov 29, 2017 8:39 pm

I am new to this Forum so apologies if this is a really naïve question!

I have a BTL property with a very low LTV ratio and would like to capital raise against it - £300-£350k. I would like to give this to my son as a deposit to get him on the property ladder. He is a student and working part-time so I am thinking he could take out a first-time buyer mortgage in his own name and his name alone would be on the property title deeds. I would have no interest in the property. Does this qualify as a gift without reservation whereby all I have to do is live for 7 years so this stays out of inheritance tax net, or is that too easy?! Are there limits to how big this gift can be? Are there any other tax implications? Is there any particular time in the tax year when it's more beneficial to make such a gift?

If we agreed that once he is earning, he could repay part of the gift, I guess that could remove the "without reservation" status. Is that the case?

Any other thoughts/advice/experience to share would be most appreciated.

Many thanks.

Lee Young
Posts:2707
Joined:Wed Aug 06, 2008 3:26 pm
Contact:

Re: Gift without reservation

Postby Lee Young » Thu Nov 30, 2017 4:22 pm

You are making a cash gift so unless you will have some sort of pre-agreed rights to the property he might buy there is no reservation, so the usual seven year rules apply.

If you are making a gift then he would not need to pay it back. if it is a loan then he would. It can't be both.

If you want to make the gift make it as soon as possible so that the seven years begins to tick sooner rather than later....
Lee Young
Solicitor, Chartered Tax Adviser and Trust and Estate Practitioner


Partner, Frettens LLP
lyoung@frettens.co.uk
01202 491701

anjo56
Posts:36
Joined:Wed Nov 29, 2017 8:27 pm

Re: Gift without reservation

Postby anjo56 » Thu Nov 30, 2017 8:40 pm

Thanks very much for the very clear reply. I am quite happy for this to be a gift. Much appreciated.

anjo56
Posts:36
Joined:Wed Nov 29, 2017 8:27 pm

Re: Gift without reservation

Postby anjo56 » Thu Nov 30, 2017 11:34 pm

Sorry, I've just had a couple of extra thoughts I'd welcome feedback on.

To get the cash for our son, my husband and I would be capital raising against a BTL property. Would we both have to survive for 7 years from gift date for the sum to be protected from IHT liability? If one/both of us didn't what would be the tax implications for our son? Thanks.

TW1234
Posts:26
Joined:Sat Jan 07, 2017 11:42 am

Re: Gift without reservation

Postby TW1234 » Sun Dec 03, 2017 4:14 pm

The source of your funds for the gift is irrelevant. If the funds are raised in joint names, the gift amount can be transferred so that is in one person's sole ownership. (Inter spouse transfers are exempt) The gift should be made from an account that is in the sole name of the person making the gift,and thus the seven years relate only then to that person's longevity.

If the resulting PET fails (due to earlier death) the IHT allowance (£325K)is first to be set against such failed PET . If there is still IHT due, the recipient is (usually) responsible for the amount due but the revenue can proceed against the estate or executors if necessary.

anjo56
Posts:36
Joined:Wed Nov 29, 2017 8:27 pm

Re: Gift without reservation

Postby anjo56 » Sat Dec 09, 2017 7:49 pm

Apologies in delay for thanking you for latest information.


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