About 5 years ago I lent my elderly retired folks a considerable amount of money to help them move in to a bungalow. They had the money but it was tied up in investments and ISA's etc. They were not wealthy (blue collar workers) who saved as best they could.
It literally was a case of "look, don't touch your savings, you need them and I have some cash that is not earning any interest and is in danger of being frittered away".
There is no documentation for the loan.
They now want to pay me back, which is cool, but I am concerned that it will be treated as a gift or inheritance by HMRC and have tax payable on it which would be a pain as I am a 40% tax payer and the amount in question is enough to buy a new BMW 3 series.
What is the best way for them to repay me without incurring any tax or inheritance liabilities?
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As long as you haven't charged interest there is no liability to income tax. Make sure they live for 7 years after giving it back to you and there will be no IHT trouble either, though as long as you document what the money you receive relates to it should not be an issue at all.
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>> Cash.
>>
Then what? If he wants to put that in the bank there'll be a load of questions.
I wouldn't want that lot sat in my house, however good you thought the safe was, they take the whole safe and break into it at their own leisure.
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If it's documented now as repayment of a loan with a recital of the history and particularly if Zippy can produce a bank trail for the original transaction then I cannot see too much of a problem. While an inter family transaction of that type might give rise to suspicion regarding inheritance tax it's not likely to be seen as income - unless of course Zippy and his parents are in business together.
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>> Cash
Whats the cash reporting limit these days?
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>>As long as you haven't charged interest there is no liability to income tax.....
.....for you. An interest free loan may have potential tax issues for them.
This isn't something to be sorted out here. You need to go and get proper professional advice about how to document it, and any implications of doing so for any of you, and to whom you can explain the details of the current situation. And I'd recommend sooner rather than later.
I wouldn't go the cash route. Aside from its inherent dodgy-ness as an approach, a chunk of change doesn't make you more likely to be robbed, but it will make it a lot more significant if it does happen.
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:An interest free loan may have potential tax issues for them."
Intriguing.
How would that arise? Even if it were not interest free I don't quite see how that could occur. If I borrow ten thousand from the bank it does not give rise to any income tax tax liability.
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It affects your tax code. We have interest free loans at work but hmrc add an extra tax on it. Whether that affects person to person loans i don't know but the principal is there from hmrc.
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I can see that - that would be a benefit in kind and I expect that HMRC would calculate the worth of the benefit as the amount of interest when compared to a commercial loan.
But that is anemployer/employee relationship
I still don't understand how I could incur a tax liability by say borrowing £10,000 from my brother.
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>> I can see that - that would be a benefit in kind and I expect
>> that HMRC would calculate the worth of the benefit as the amount of interest when
>> compared to a commercial loan.
>>
>> But that is anemployer/employee relationship
There are some exemptions covering, for example, season ticket loans which were enough to keep my annual advance for that purpose out of my tax code. Would have been caught if I'd lived much further out than Northampton though.
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"I still don't understand how I could incur a tax liability by say borrowing £10,000 from my brother."
..... it all gets into 'grey area' territory ....... then silliness. What if he lent me his second car for 6 months?
I remember an episode of Fred Dibnah when Fred demolished a chimney for a foundry owner in return for a new casting for one of his steam-engines. The taxman got in on the act, and charged them both tax. I suppose the answer is never to talk about it, or make a t.v. programme about it!
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Again I can understand that. We are talking about service rendered in lieu of cash for a service rendered. That is income and potentially subject to income tax.
I still do not understand how a a loan, interest free or otherwise could attract income tax.
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Who'd have thought that so much trouble would be caused by a good deed!
I will have a chat with a friendly accountant when I get the chance.
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>>I will have a chat with a friendly accountant when I get the chance.
Best, I think.
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>>I still do not understand how a a loan, interest free or otherwise could attract income tax.
Well its obviously distressing you considerably, so perhaps a word with a tax expert might settle your fears? I do apologise for mentioning it in front of you.
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What a curious response. It's not distressing me. I woiuld just genuinely like to know the answer. Could you not enlighten me?
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"That is income and potentially subject to income tax."
This is where it gets greyer ...... say the foundry-man just made a boiler-part for Fred to do a long-term test on it? And Fred knocked the chimney down as a test-exercise for a new technique?
............. your honour.
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>> "That is income and potentially subject to income tax."
>>
>> This is where it gets greyer ...... say the foundry-man just made a boiler-part for
>> Fred to do a long-term test on it? And Fred knocked the chimney down as
>> a test-exercise for a new technique?
>>
>> ............. your honour.
>>
Expand. No, it's not a Boiler joke.
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SQ
>> I wouldn't go the cash route. Aside from its inherent dodgy-ness as an approach, a
>> chunk of change doesn't make you more likely to be robbed, but it will make
>> it a lot more significant if it does happen.
>>
That's a VERY good piece of advice for reasons that should be obvious.
Last edited by: VxFan on Sat 5 Dec 15 at 21:15
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Repayment of a interest free loan cannot be deemed to be income.
The only possible charge would be Inheritance tax BUT 2 married people have a combined
IHT exemption of £600,000. The taxman might look at something if the total estate is around that figure.
OP mentioned his parents were not rich - from that I take their total assets are less than £600K as, in my book, £600K is chunky money.
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"Repayment of a interest free loan cannot be deemed to be income"
That tallies with my understanding FB. Still curious as to why FM2R thinks otherwise but I don't think he' s going to tell us.
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You're obsessing and i see no reason to pander to your wittering. Go back and read my note again if you need clarification.
As i said, professional advice is required not forum opinion.
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I am not obsessing.
I am not seeking to provide professional advice.
You have clearly stated that income tax can be payable on a loan.
I just what to know in what circumstances it could be. A general answer.
I am beginning to think that you know your statement it's incorrect.
I rather suspect that you do not like admitting to mistakes.
I do not understand why.
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Oh for goodness sakes, for a man not obsessing you are going on and on and on.
My statement was spot on.
I said that he should seek professional advice, I said it may cause tax issues. Do you KNOW that it won't ? I obviously don't know, or I would have told him the answer and not suggested professional advice. Do you know how it could be misconstrued with house ownership / share / profit? Do you know what other implications there may or may not be?
No? Well find out or let it go.
And as for this.....
"You have clearly stated that income tax can be payable on a loan."
Where have I clearly stated that?
You silly, silly, little man.
Last edited by: No FM2R on Sun 6 Dec 15 at 00:17
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>> You silly, silly, little man.
Lots of people have silly moments FMR.
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I guess so, AC, I guess so.
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>> Oh for goodness sakes, for a man not obsessing you are going on and on
A rather common response for those not wishing to answer a straightforward question and would instead like to bluster.
"Where have I clearly stated that? "
>As long as you haven't charged interest there is no liability to income tax.....
.....for you. An interest free loan may have potential tax issues for them.
If you can tell me in what circumstances an interest free loan can possibly have tax issues It would be of interest. Many of us on the forum have loans, interest free or otherwise, and I am sure it would be useful information to have.
Perhaps a man of your erudition might humour a silly silly man?
I would be grateful
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Why are you obsessing over this?
Read what I've already written. Its all there. Although putting a little of your fervour towards actually reading may help you progress.
>>might humour a silly silly man
I can think of no reason why I would waste my time on such a pointless and joyless exercise.
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You know what? The chain above has me sympathising with Pat's 'only in this forum' line.
Like CG my interest was piqued by suggestion that a loan between family members might have tax implications for the recipient. Not to prove anybody right or wrong but just because my interest in 'technical' stuff extends well beyond machinery.
While Mark is quite right to suggest Zippy needs professional advice on specifics there may be an interesting discussion around the principles
If for example parents were to reduce their estate below IHT limit by making open ended and interest free loans to offspring then, on death, the tax inspector might deem a liability. In practice of course that's that's so obvious that the transaction would need a complex legal wrapper to make it remotely legit.
Perhaps in a few hours when it's daylight in Santiago Mark might 'spill the beans'.
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>> Perhaps in a few hours when it's daylight in Santiago Mark might 'spill the beans'.
Since when did the very simple little word "may" suddenly become "There is definite issue here but only I know about it and I am not going to tell you"?
There are no beans to be spilled. Like CGN you are making mountains out of molehills.
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>>Like CGN you are making mountains out of molehills.
Whatever.
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I agree with Bromps and others. More energy has been wasted in arguing and denigrating than it would have taken to respond to the original question. Since when has asking a reasonable question, or asking someone to elaborate on a statement on a forum been making a mountain out of a molehill? That's usually the idea of forums, to have a discussion, isn't it?
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>> I agree with Bromps and others. More energy has been wasted in arguing and denigrating
>> than it would have taken to respond to the original question.
Agreed
>> Since when has asking
>> a reasonable question, or asking someone to elaborate on a statement on a forum been
>> making a mountain out of a molehill?
But didn't you just complain >> More energy has been wasted in arguing and denigrating
>> than it would have taken to respond to the original question.
Come on you can't have it both ways, specially not in the same paragraph.
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I'm a Mod mate, I can do what I want :-)
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That was kinds of my point Bromptonaut. I was mildly interested in how Tax liabilities could arise out of interest free loans as I cannot understand how this could be except perhaps in the way you outlined.
I still cannot understand how they can and indeed From the lack of response, bluster and abuse I assume that neither does F2MR.
He appears to be very odd person who seems to be unable to accept anything that he perceives as criticism and seems to think that whatever he say should be taken as gospel. Very odd indeed. Some sort of personality order I woiuld think. No point in pursuing it further.
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>> That was kinds of my point Bromptonaut. I was mildly interested in how Tax liabilities
>> could arise out of interest free loans as I cannot understand how this could be
>> except perhaps in the way you outlined.
>>
>> I still cannot understand how they can and indeed From the lack of response, bluster
>> and abuse I assume that neither does F2MR.
Are *you* prepared to stand up and offer the definitive advice and statement that there are definitely no tax liabilities arising from this scenario under any circumstances?
Last edited by: Zero on Sun 6 Dec 15 at 10:24
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>> Are *you* prepared to stand up and offer the definitive advice and statement that there
>> are definitely no tax liabilities arising from this scenario under any circumstances?
as you have not replied with a firm "yes" I assume you accept that there may be an element of uncertainty, however small, and that confirmation from an expert may be a good idea.
Given that, and the fact you accept the "may" what exactly is your beef?
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>> Given that, and the fact you accept the "may" what exactly is your beef?
In so far as OP was looking for definitive advice he was (rightly) pointed in the direction of a professional. That leaves open the curiosity of why Mark, who is generally clued up in these sort of things, thought there might be a tax issue - whether related to income or capital taxes.
That might be an interesting subject for discussion/wildly misinformed speculation.
That's all.
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>> >> Given that, and the fact you accept the "may" what exactly is your beef?
>>
>> In so far as OP was looking for definitive advice he was (rightly) pointed in
>> the direction of a professional. That leaves open the curiosity of why Mark, who is
>> generally clued up in these sort of things, thought there might be a tax issue
>> - whether related to income or capital taxes.
>>
>> That might be an interesting subject for discussion/wildly misinformed speculation.
>>
>> That's all.
You are in the same boat, I'l ask you the same question, you will say "no you can't guarantee there wont be, and its best to accept professional advice", which is EXACTLY what Mark is saying, and you are agreeing with him. So where is YOUR beef.
WTF are you two having a go when you both by default agree with him?
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>>That might be an interesting subject for discussion/wildly misinformed speculation.
But you're unable to have it without me? Oh dear.
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Awwww, is the nasty man not answering your questions.
"Mummy, Mark said something "may" be the case and now he won't answer my pathetic questions! Mummy, mummy, make him tell me"
Silly little comments about Mark revealing all, or Mark is this that or the other would be relevant coming from someone of value.
Do you seriously think such comments make any difference to the likelihood of me saying something? Look in the mirror, try and work out what I think of you. And like it or not, agree or not, care or not, you know I genuinely think it about you.
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FFS. If you don't want to facilitate some discussion fair enough but cut out the childish twaddle.
Please.
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>> FFS. If you don't want to facilitate some discussion fair enough but cut out the
>> childish twaddle.
>>
>> Please.
>>
+1
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I can see where an interest free loan twixt family members could alter a tax position, but as far as I can see, it will only occur if one party dies before repayment is complete. Even then, the sum loaned should not form part of the lendee's estate and properly documented an executor should not consider it thus.
If no-one makes any money, how on earth does the tax man want 20%, 40%, 50% of nothing? Do they want a cheque for no pounds and no pence? :o)
I'm about to make a substantial loan to my brother and I'm not in the least worried.
I've also made a much smaller loan to someone else that in theory might attract interest, but non so far has been paid and I'll just be making sure that any income arises wholly within the same tax year. HMRC are devils for saying you made £x this tax year so must be making £x + a bit the next tax year. A bit easier to sort if there is no future tax liability.
Last edited by: Slidingpillar on Sun 6 Dec 15 at 14:16
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> If you don't want to facilitate some discussion fair enough but cut out the childish twaddle.
Are you really that silly? I hardly consider it childish twaddle, well no more so than is needed to make it understandable to the audience, but I feel you may have misunderstood your standing in my life if you think a request of that type would amount to any more than grandstanding in front of your buddies. Popularity seeking, perhaps?
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Re Mark's comment further up - I'm sure most here would consider that CG Norwich is someone of value - I know I do.
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>> Re Mark's comment further up - I'm sure most here would consider that CG Norwich
>> is someone of value - I know I do.
+1
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"CG Norwich is someone of value"
But somewhat tarnished by the fact that he supports Norwich
;-)
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>> "CG Norwich is someone of value"
>>
>> But somewhat tarnished by the fact that he supports Norwich
>>
>> ;-)
And has crap taste in coffee.
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And thank you too Bromtonaut.
I would just add that I'm my experience whilst those of F2MR's personality type seem super confidant that confidence is fairly fragile and easily damaged so I would just like to assure him that I think he is someone of value too.
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>> I would just add that I'm my experience whilst those of F2MR's personality type seem
>> super confidant that confidence is fairly fragile and easily damaged so I would just like
>> to assure him that I think he is someone of value too.
>>
>>
>>
Don't let him know that, he's insufferable enough already ;-)
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>> Don't let him know that, he's insufferable enough already ;-)
>>
Well yes, but I wouldn't want him to feel unwanted.
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>> I would just add that I'm my experience whilst those of F2MR's personality type seem
>> super confidant that confidence is fairly fragile and easily damaged so I would just like
>> to assure him that I think he is someone of value too.
This thread has now taken on a surreal quality,
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>>This thread has now taken on a surreal quality,
What's known as a love in I do believe.
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>> so I would just like to assure him that I think he is someone of value too.
>>
....you'd like to assure him, but...........
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>t that confidence is fairly fragile and easily damaged
Yeah, well, I hardly think so. And if it was, I think it'd take a bit more than someone like you to bolster it up, don't you?
>>I would just like to assure him that I think he is someone of value too.
Consider me assured and relieved. I wish I could do the same for you.
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"Awwww, is the nasty man not answering your questions."
Talking of 'not answering questions', the world has been waiting for NoFM to answer the question that appeared on these boards 2 days ago .............
"Calm down, NoFM, and tell us, what is your definition of a racist?"
He said "walks/duck", so maybe he thinks it's some sort of web-footed aquatic avian?
I recall a few years ago when fanatics who didn't know the difference between paedophiles and paediatricians were attacking doctors.
Come on, NoFM, you've had long enough to look it up!
By the way, have you calmed down yet?
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>the world has been waiting for NoFM to answer the question
Really? I am *that* important to you? How very, very sad. I wish I could say you had at least some relevance in my life beyond getting irritated by your whining, just to help your self esteem.
All in all, it is a little sad how this audience one the one hand appears to believe my comment and opinion essential to their progress through life, but secondly flock together in a little gang to criticise. All a little playground mob, don't you think?
Given that most of you in here will know what I think of you, I assume that you're falling back on believing me to be incorrect to preserve your own comfort?
Last edited by: No FM2R on Sun 6 Dec 15 at 21:34
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>>He appears to be very odd person who seems to be unabl
Do you not have big enough balls to say "you are....", you resort instead to your little "behind the bike shed" whispers?
I love how much stress and anger I get rid of in this place, but I do wonder how this little huddling helps others. A little Freudian relief from earlier unhappy experiences perhaps?
Last edited by: No FM2R on Sun 6 Dec 15 at 21:40
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For god sake give it a rest - all of you.
And also put your willies away while you're at it.
One wonders if you'd all behave like this in the real world instead of behind the safety of your keyboards.
I don't know about Financial help, it seems some of you need anger management help.
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Obviously a loan creates a liability so making open ended interest free loans would not reduce the size of the estate.
I read the point as a simple one - being the borrower in an interest free loan arrangement can create a tax liability, which is nothing to do with either the principal or repayments being treated as income, but to do with the value of a benefit in kind i.e. the value of being let off the interest.
That is why interest free loans from employers might create a taxable benefit.
I would seriously doubt whether private interest free loans within families would attract any charge, any more than taking an interest free loan for a sofa from DFS results in a tax bill.
Interest charges on the other hand would have to be declared as income by the recipient, so if family members were to make such loans to each other then it would be better for the lender if the borrower, instead of paying interest, were to make the lender a gift every year of an amount within the £3,000 a year allowance.
But all that is speculation.
If there's a lot of money involved, best get proper advice or keep it well under the radar!
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>>But all that is speculation.
>>If there's a lot of money involved, best get proper advice..................
Wish I'd said that.
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Can anyone suggest why this forum doesn't attract many new posters?
And why those of us who do read it on a fairly regular basis, rarely post?
Maybe our willies are too small ;-)
Last edited by: ChrisM on Mon 7 Dec 15 at 10:33
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>> Can anyone suggest why this forum doesn't attract many new posters?
>>
>> And why those of us who do read it on a fairly regular basis, rarely
>> post?
>>
>> Maybe our willies are too small ;-)
Don't want to say anything ChrisM, but I did see something along those lines about you scrawled on the toilet wall ;)
Actually, sometimes this place is a lot like the toilet wall.
Last edited by: Zero on Mon 7 Dec 15 at 10:39
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>> Actually, sometimes this place is a lot like the toilet wall kindergarten.
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>> >> Actually, sometimes this place is a lot like the toilet wall kindergarten.
True, but for those of us whose kids have left home, it is quite entertaining.
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You lent cash to your parents. You can produce a bank statement to show the transfer of cash and it's easy to prove that it coincides with the purchase of the bungalow. Your parents now repay the loan. Why would you waste money on financial advice on this point?
(The taxman knows that nobody in their right mind would give money to elderly parents on account of a potential IHT liabiity. If they were to ask, they wouldn't be surprised to discover that it is a loan. They won't.)
>>They now want to pay me back, which is cool, but I am concerned that it will be treated as a
>>gift or inheritance by HMRC and have tax payable on it which would be a pain as I am a 40%
>>tax payer
That you pay income tax at 40% on your income has nothing whatsoever to do with receiving cash from your parents - whether by way of repayment of loan, nor of gift. (You never paid income tax when they gave you Lego, did you... And IHT pays no attention to the income of the recipient)
If your parents do not have combined wealth in excess of £650k then it's all irrelevant anyway, as there would be no IHT to pay.
(Circumstances where an income tax charge can arise on something that looks like it's trying to be a gift are when you fall foul of the Pre-Owned-Assets-Tax. This (normally) involves your parents giving you their home, and then carrying on living there themselves. You are not trying to do anything clever like this!)
All the above should, of course, be regarded as no more categorical than anything else you read anywhere on the internet.
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The voice of reason prevails at last, Mapmaker (or can I call you Mappy now?!)
Pat
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Thanks MM.
I was worried that repayment would be considered as a gift in excess of the £3k annual allowance and therefore taxable.
I have a building society book that shows the money coming out of my account by cheque and the folks have a bank statement showing receipt of the funds.
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>> Thanks MM.
>>
>> I was worried that repayment would be considered as a gift in excess of the
>> £3k annual allowance and therefore taxable.
AIUI, assuming both your parents are still living, they each have a £3k limit so £6k in total. And IHT would only be payable in event of death within 7 yrs.
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>> And IHT would only be payable in event of death within 7 yrs.
>>
And then on a sliding scale depending upon the age of the gift.
AIUI.
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>> >> And IHT would only be payable in event of death within 7 yrs.
>> >>
>>
>> And then on a sliding scale depending upon the age of the gift.
>>
>> AIUI.
>>
And then only if the combined estate of the two parents were in excess of £650k.
The sliding scale, BTW, only helps for gifts that in the seven (occasionally fourteen if you've been using trusts) years prior to death exceed £325k. For gifts less than that, you have to survive the full seven years or it makes zero difference.
IHT is only ever payable on death. (Or on lifetime gifts into discretionary trusts in excess of the exempt amount of £325k. But you're not doing that.)
The relevant sentence from the above for OP, based on the information given is "IHT is only ever payable on death." Probably worth repeating the point that repayment of a loan is not a gift for IHT purposes.
Again, internet gossip rules apply, etc. etc. etc.
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No, Patty, you may not. But thank you for asking first.
Last edited by: Mapmaker on Tue 8 Dec 15 at 09:54
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>> you may not<<
When has that ever stopped me:)
Pat
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Financial Help - Alastairw
