My client has sold her property and made a cash gift to her daughter. The daughter will use the funds as a deposit for a property where mum, daughter and daughter’s husband will live and share outgoings. Mum has already signed an acknowledgment for her daughter’s mortgage company to confirm she has made a gift of the cash and will have no interest in the property which will be registered in the names of daughter and daughter’s husband. Would this be an associated operation to bring the cash gift within the GROB rules? If so, would the shared occupation of the property give rise to an exemption provided shared occupation continued? Is it necessary to agree with HMRC that they would apply the associated operation rules now, to avoid a potential POAT charge in the future?
I’m not an expert on IHT - the GWRB is an interesting question. We have always considered it to fall foul of the rules - I’m happy to stand corrected on this point.
However - we have advised clients in the position you have suggested to not make a gift, and consider the monies a loan, repayable on demand. Therefore the ‘gift’ issue is eradicated. Implications of the loan need to be considered, it can provide an alternative if the gift is substantial.
Halifax (for example) will allow either a gifted or loan deposit.
“Mum has already signed an acknowledgment for her daughter’s mortgage company to confirm she has made a gift of the cash”
I suggest that in these circumstances it would not only be unwise to present the transaction to HMRC as a loan but a tax offence of a criminal nature (and possibly a breach of the mortgage agreement but not if the cash gift is the truth and is not disavowed as regards the lender). The days of “now what shall we tell the tax people?” are over and the naive must take care not to join the intentional and the reckless in evasion. An adviser who co-operates in such a plan runs a personal risk. Scrupulously law-abiding advisers on tax, especially non-lawyers, often do not have the criminal law on their radar.
No ones suggesting in the case above they change their position, the lender would not accept the change from gift to loan either way.
How an individual makes monies available to family members by gift or loan is up to them - as discussed the mortgage lender allows either.
The discussion around gift or loan was also discussed earlier this year: When is a Gift actually a Loan - Trusts Discussion - The Trusts Discussion Forum
I appreciate this is drfting away from the POAT/GWR question but, regardless of whether the lender will allow a parental loan, or requires that it has to be a gift, the important aspect is that once the nature of the parental contribution has been “certified” to the lender that is basically it.
Paul Saunders FCIB TEP
Independent Trust Consultant
Providing support and advice to fellow professionals
It should be noted the lender does require the “Loan/Gift” advice to be signed off by an adviser before the offer is agreed.
Thank you all for the replies and the helpful discussion, very much appreciated. I am approaching this on the basis that my client has already declared the gift (she has provided me with a signed document which is on the mortgage company’s records stating it is an unreserved gift and that she takes no interest in the property). I now need to work out the appropriate steps to assist her going forward. She has adequate NRB/RNRB allowances to cover her assets even including the sum gifted, so I am considering whether if there is a risk that this is POAT it is in her best interests to seek confirmation from HMRC that they will treat it as a GROB.
I am grateful to Paul for the link to a thread I also contributed to. The mother’s statement to the mortgagee is almost irrefutable admissible contemporary evidence of her actual intention. It would be nigh impossible to contradict it or argue it away. Other opinions are available.
The GWR provisions should not apply.
Shared occupation may preclude a GWR issue arising [FA 1986 S102B(4)] but involves a gift of an undivided share in land, not cash.
There will however by a POAT charge. A possible election into the GWR regime may be considered.