IHT
A partnership (husband and wife, both pensioners) haulier business (one lorry) has a building society account holding £250.000 in Current Assets on the Balance Sheet. Their son is a self employed haulier with his own lorry and both businesses operate independently. Total unencumbered assets of the husband and wife total approximately £800,000.
There is to be a purchase of land for £150,000. The land will be used to park the lorries of each business and to provide a site for setting up a soil sreening machine for the partnership to operate. Funding of the purchase of the land is proposed to be £30,000 from the son and £120,000 from the building society account. It is proposed that the land will be purchased and owned by the son only. It is not envisaged that the partnership will pay any rent to the son for parking or use of an area of the land upon which the soil screening equipment will be sited.
Is there any problem here with IHT and Gift with Reservation? If so, would it help if the £150,000 was transferred to a private husband and/or wife bank account and from there to the son to enable he, the son, to make outright purchase of the land ?
Any replies would be gratefully appreciated.
IHT implications 1 thanks
Very rough thoughts without checking or reflecting:
(1) Son buys land for £150,000, H&W having made a gift to him of £120,000 in cash to part finance it. Leave aside free parking of H&W's lorry, it seems that must be the true construction.
(2) It is not a gift of the lad by H&W to Son. I assume Son will buy the land from a third party.
(3) The fact that the £120,000 cash is at present in H&W's business account, as opposed to their private account, does not seen to matter in this narrow context: it is H&W's cash which they give to Son.
(4) as a separate matter, consider treatment of withdrawal of £120,000 from partnership bank account: perhaps partners' drawings of profit? The loan is not being made by H&W as part of tier business as hauliers.
(5) Free parking by H&W on Son's site: if anything this is some transfer of value by Son to H&W.
In no way is this comprehensive, but it may form a starting point.