Thank you in advance for any help here.
Helping friends at the moment, and they are querying what they need to think about and do when selling a property.
They are an elderly couple who wish to sell their property to their daughter at below market value. They have been gifting the child large amounts of cash over the years. They are living in the property at the moment, and plan on staying in there once the property is sold.
My questions are what are the tax implications of this?
Is it true that if they survive 7 years then they will have nil tax to pay? Is there any tax payable on the cash gifts? They have not kept any documentation of the gifts of cash given, and seem to not want to give this info to the HMRC - I have told them they need to keep records. What will HMRC do if they don't keep records?
How does capital gains tax work here? Is it only liable after the 7 years? Do they need to let HMRC know that the property will be partly a gift at below market value? Or will this automatically happen as part of the sale?
Is it true that as they are living in the property then it will be added to the estate if they dont write up a rental agreement? And how do you report this to HMRC?
The consideration paid for the property is confusing, they have said that the daughter will be paying for some refurbishments, instead of paying for the property? Unsure on this bit.
I appreciate any help! I am kind of comfortable with the general rules around this, but still feel unsure on a number of bits.
p.s before anyone says it - i agree they need a tax accountant who specialises in property. I am just advising as a friend and have told them this. But they seem resistant to professional help!
Sorry for all the questions - and thanks again.
Replies (33)
Comments for this post are now closed.
Do they realise that the professional help they are so resistant to will save them money?
Clearly you haven't experienced illogical people.
I am hoping if they start to feel comfortable with some help, they will feel comfortable to seek out more help.
That was not a good start.
No ... that NEVER happens in that scenario.
If you pander to their illogicality (which is what you are doing) then they have zero incentive to think differently AND worse you are now on the hook* for anything that goes wrong.
* = the scale of that hook, and the damage it can cause, will be particularly severe if you are actually a professional (who is misguidedly providing a free service), but can still be massive for you (and worse for your friends) if you don't know what you're doing.
And you patently don't.
Yes you've posed a number of relevant questions (alongside a few irrelevant ones), but there are considerably more highly pertinent ones that you've not raised.
As it stands you're in Morecambe and Wise territory (the right notes but not in the right order), which is not want your friends need or deserve.
Are you honestly assuming that I am giving free accountancy services? I have not said anything whatsoever to even suggest this!
How are all these wild assumptions helpful!?
Such an antagonistic place!
I have found my answers anyway on here from one helpful user, other forums and HMRC!
So very strange though!
Real old man shouts at cloud energy
No idea as to what your final sentence means ... but as to the rest of it:
Please read properly anything to which you're responding (especially when being unnecessarily antagonistic).
When I said: "if you are actually a professional (who is misguidedly providing a free service), but can still be massive for you (and worse for your friends) if you don't know what you're doing. And you patently don't."
... I'd have thought it was obvious that I don't think (or assume) you are giving free accountancy services - although the site is solely for professionals (so I covered that angle).
Good luck if you think you've "found your answers" - but I seriously doubt that you have (in terms of all the implications and inter-actions with your friends' story).
Please ensure (for your sake, not mine or anyone else on here) that any 'advice' you give your friends is (a) not in writing and (b) prefaced with a caveat along the lines of 'this is my unqualified opinion but you should seek the formal advice of a professional before making any decisions'.
If you're not an accountant, I'm not clear why you're even getting involved let alone offering advice.
The idea that they don't want to pay for advice so contributors here should give the (desperately needed) advice for nothing is, to be blunt, grossly insulting to the profession.
Why is everyone so aggressive about this?
It is literally a forum for asking questions and I am trying to help them.
Not helpful
You “literally” haven’t read the site owner’s terms and conditions. Clue: its not a forum for people who know nothing about tax to ask questions on behalf of people who need tax advice but don’t want to pay for it. Hope that helps.
I would be wary of going around trolling this forum, and essentially gatekeeping tax /accounting advice through repeated, aggressive and unhelpful responses.
You are doing a disservice to the profession.
It's not a forum for free advice for the general public.
It's a forum for professionals to discuss arcane points of tax law and criticise HMRC.
That's why you're being asked to read the terms and conditions where it says exactly that.
That aside, your friends need tailored, personal advice. Big sums of tax are involved here. Asking random strangers on the internet is not a good idea.
I don't want to appear unhelpful but there are some tax 'traps' here.
Firstly if they 'sell' the property to their daughter at less than its true value they may be making a 'gift' which might (or might not) have adverse Inheritance Tax consequences. It is quite possible that, as the property in question is their home and they will continue to live in it after the sale, that on the parents' deaths the sale will be ignored and the Inheritance Tax calculated as if the sale had never happened.
It is also possible that the daughter (if she is not living in the house or if she has more than one house) might have capital gains tax to pay when she eventually sells the house.
It is also possible there could be uproar in the family if this daughter is not the only child the parents have.
It is also possible that if the parents go into care homes or claim social security there could be a challenge to the 'sale'.
Also I'm thinking (because this is how I think) where did the parents' cash come from - has it come from some sort of taxable income of the parents in the past which they did not declare at the time? Could this lead to tax, interest and penalties if HMRC get to hear of it?
Oh, I forgot SDLT.
Obviously you cannot put all the facts which might be relevant on here. Equally obviously you cannot get reliable advice from here from people who are not in possession of all the relevant facts.
David
No this is helpful! Thank you very much, bit of a relief getting on understanding response. They are being willfully ignorant and their daughter is freaking out a bit. So doing what I can.
The complexity and examples mentioned should go some way in helping convince them that they need help or at the very least shouldn't ignore this and get into hot water with HMRC ! :)
And i actually agree on the suspicions around the cash... but unsure on it
'And i actually agree on the suspicions around the cash... but unsure on it'
My thought also.
It would explain why they want to be rid of the money.
IHT comes in for a couple at about £1 million, so the first thing to figure out is whether they have that much in assets.
I genuinely think they are looking to avoid care costs. You mention nothing about their health.
You also do not mention whether daughter lives with her parents. Nor why she is freaking out.
Convince daughter to visit an accountant unless she is equally illogical
There really is not much we can advise on because the intentions and reasons will be unknown to you as well.
And so that you are clear about the purpose of Any Answers, You clearly chose not to read
https://www.accountingweb.co.uk/any-answers/how-to-use-any-answers
All registered members who have logged into the site can respond to the questions. Please note that the people who answer are often professionals who are sharing their expertise for the greater good of the community. They are not here to provide free accounting advice.
Users are free to seek clarification for technical issues that are troubling them, but tax and accounting can be very complex. Any Answers conversations can get very involved around what the legislation says and how different people interpret the regulations. As one member wisely advised: “If you intend to plan a course of action based on what you read in here, you should instead be taking professional advice.”
I will reiterate what I said to the other user you are defending:
I would be wary of going around trolling this forum, and essentially gatekeeping tax /accounting advice through repeated, aggressive and unhelpful responses.
You are doing a disservice to the profession
Nowhere have I asked for free accountancy advice. But i have been met with multiple accusations and assumptions, by you and your friend.
I am on here helping a friend and apparently helping the HMRC, as it has highlighted serious tax issues that have been overlooked. Whether due to wilful ignorance or otherwise.
Help by the way, that came from another user. Help which will also be beneficial to the daughter who is trying to do the right thing.
No wonder she asked me, she is probably terrified of coming on here and asking herself
I don't normally repond to negativity and bad vibes. But as a first time user of this sevice i am absolutely appalled. You ought to be ashamed.
If you are going to help friends (who in your own words are illogical and don't listen to your good advice), then at a minimum you need to acquire those skills of which you accuse them of being deficient ... i.e. start listening.
Previous posters were making perfectly sensible (and helpful if you stop to think) comments, which will rapidly point to the fact that you should NOT be providing a service (however well intended) on a complex topic that involves rules you don't understand - but could potentially cost your friends or their daughter multiple £100k.
And whatever you think ... this is not some sort of 'protectionism', none of the contributors are touting for your business and many are recently retired. But they do have plenty of experience in the areas you've described and can quickly spot when someone is way out of their depth and needs professional advice.
Touting for what business !? What are you talking about. Please note this has absolutely nothing to do with my question! This is actually laughable now. Bless your heart.
But again I have looked at the history of all your accounts and this also applies to you:
I would be wary of going around trolling this forum, and essentially gatekeeping tax /accounting advice through repeated, aggressive and unhelpful responses.
You are doing a disservice to the profession
"But again I have looked at the history of all your accounts"
.. to respond at the same now childish-level to which you've descended (without help from anyone else) - No you haven't.
Errr I can see all your comments and answers and questions. So yeh I have looked at all your accounts.
And you give the same energy to lots of users
P.s I have descended into less professional responses as I have lost all respect for you all
"IHT comes in for a couple at about £1 million...."
Maybe.
Asking 9 questions is not asking for free advice?!
There is a difference between stumbling across this forum thinking it is a “service” (your words) and being a member for 8 years.
Feel free to look up my history too. It takes a lot to put my back up, although I am in discussions with AWeb so hopefully changes are coming to make this place less toxic.
If they aren’t made soon will the last person to leave the forum please turn out the lights.
I have found my answers from other more friendly forums.
I mentioned the responses here. They told me to steer clear of this place as it is known to be toxic and garbage. They said you have to face a tirade of abuse, just to get to the odd gem of a response.
Not worth it!
So congratulations to all of you on making a good space for people to come for help! Great for the accounting community!
Good work! You must be proud!
Anyway I can help my friend today, so I am happy about this.
Enjoy your life as a troll!
With a few notable exceptions this accounting community (you are not an accountant so what makes you think you are entitled to join?) tends to get on very well together. If our responses to you discourage, and keep the site free from, other ingrates like you with their playground abuse, all the better.
I disagree, keep living in your useless echo chamber!
It's possible my point has been lost in the subsequent back and forth, so I will repeat it.
Please tell your friends that taking professional advice could save them money.
For the avoidance of doubt, by taking professional advice I mean paying a decent professional advisor. This forum is not an advisor (professional or otherwise). No forum is. Nor is HMRC.
Excellent news! If you wouldn't mind spreading the word about how awful and unhelpful we all are here you'll be doing us all a huge favour.
This is the reason I have got annoyed! Exactly! You are using this forum as your own personal ego boosting domain. Berating OPs who dare to ask questions.
It is terrible for the accounting community
Not all. Just freeloaders.
Another assumption! Good work!
Interesting how more professional accountants in other forums don't feel the same!
Give us an example.
With respect id stop advising them on anything.
You're opening questions indicate you don't have the knowledge to advise them on anything. This is basic stuff for people who do this, nothing complicated but you're questions are ones that imply basic understanding is somewhat lacking, which worries me as to what you've already advised.
Hi everyone,
Any Answers is a professional forum. We expect members to behave appropriately and sensitively at all times and never to post comments which are knowingly offensive or rude. I've decided to close the thread as well as unpublish numerous comments.
Molly.