Dear all
I would be grateful for thoughts on an interesting scenario which has been posed by a client.
In short, my client is the owner of a property complex, one of the flats in which she lives (Flat A). She is planning to use cash to purchase a new flat for her to live in (Flat B), with the balance being funded by way of a mortgage in her son’s name (he would not be resident in the flat).
Her original plan was that she would gift her contribution to her son so that he owned 100% of the beneficial interest of Flat B, whilst she would live there rent-free - a clear GROB, which I pointed out to her, so that plan has been shelved.
The son has suggested an alternative option. He owns a flat of his own (Flat C), and has proposed that the arrangement above would still apply, i.e. his mother would gift him the cash, he would purchase, and be the sole legal and beneficial owner of Flat B, but he would live there. His mother would instead move into Flat C, and live there, again rent-free. Flat C would remain in the son’s name.
My immediate concern when this arrangement was put to me was that POAT would be engaged, but on reflection I am not so certain that it is. A concern is that the mother made a relatively small gift to the son several (more than seven) years ago, around the time that he purchased Flat C. The son contends that this money was not used to fund the purchase of Flat C, although he concedes that some of it may have been used to furnish it. To me, this would appear to be the “in” for HMRC, were they to seek to claim that POAT applies.
Putting this gift to one side, what are the thoughts of other members as to whether POAT is engaged by this proposed arrangement? And/or are there any other pitfalls I have not thought about?