Change Of Ownership

[pinkjudy45]

I have a small house that I rent out at the moment but I want to put into my sons name, (I know about the 7 year ruling), that means he would get any rental money, or could he let me have this money or is this illegal?

[ubasses]

I think if you receive any material benefit (gift with reservation of benefit) it will fall outside the 7 year rule and be included in your estate.
If you give it away and your son is keeping the rent, you will need to look at the CGT inplications.

[pinkjudy45]

Thank you for the information 'ubasses' it is very useful.

[Peter Pedant]

falls foul of the reservation of benefit /interest in possession rules

in the same positiion as a flat I assigned to my nephew
and concluded he had to take over the tenancies and declare them on his own tax form from the date of assignment. ( and payy tax on it )

so he could then give you the nett taxed income but I am not sure if the tax man would wear even that - brown envelopes needed. Just to remind you People have been there before - one of my relations yapped: " I am not paying tax on income I dont see "


You see seem like a leddy with monay - beware the rules on serial giving to your lucky nephew - the seven year clock gets reset to the most recent gift

AND the sevent year rule taper applies to the tax rate and NOT the capital sum

[Peter Pedant]

damn I should have larded my answer with liberal quantities of

I say,
it seems that
I think

sozza about about that
serial giving
http://www.theanswerbank.co.uk/Law/Question1427012.html

but I seem to have to have lost the ref ( it is there somewhere )

[themas]

PP You say “You see seem like a leddy with monay - beware the rules on serial giving to your lucky nephew - the seven year clock gets reset to the most recent gift” & in the post you link to you say the same. I’m pretty sure you’re wrong! – each gift drops out of consideration seven years after it was given (assuming the giver is then still alive). But I stand to be corrected if you can give a link to HMRC guidance supporting your view!

[Barmaid]

You have two issues to contemplate

1) is your estate likely to be taxable - if so the gifts with reservation of benefit provisions will apply if you want to take the rent money.

2) If you decide to let him have the rent money, you have to consider whether you will survive by 7 years. Ultimately if he is going to get it anyway, you might as well do it since the amount of IHT will taper the longer you survive.

3) is a significant reason for your transfer to avoid care home fees? In which case there is no time limit.

I should think very carefully about this. If you put it in your son's name and he goes bust, his creditors will take it. Take legal advice.

[Barmaid]

I cant count, I meant "three or more"..........

[Peter Pedant]

hemas it is here
worked example 3

[Dogsbody2]

Peter your point above about potential IHT - any reduction taper applying to tax rate, not the capital. Could you be so kind to explain what you mean as that doesn't seem to align to what this says.
http://www.hmrc.gov.uk/manuals/ihtmanual/ihtm14612.htm

[themas]

PP

You (I assume) posted a link to the examples but – on my screen – it has disappeared. Nothing there at all except “hemas it is here worked example 3”

Could you please post the link again.

[Peter Pedant]

Hey ?
The link does exactly what it says

say there's chargeable PET £40k at years three and four
then it is not 80% of 40k that is taxed at 40%

the tax rate is reduced to 80% of erm 40% which is 32% - which I refer to as the tax rate is tapered .....

that is tax rate is tapered ( 40% to 32 % ) and not the capital sum ( 40k to 32k )

as I said I think ... or I think I said that

I mean the matrix on the URL even has "%age of full tax rate"

The URL that got wiped was
http://moneytothemasses.com/tax-advice/inheritance-tax-iht-taper-relief-on-gifts-explained

but isnt quite the one I was referring to

[Peter Pedant]

This refers to the 12 or 14 y rule but wasnt the article I was talking about
http://www.telegraph.co.uk/finance/personalfinance/tax/11937233/The-14-year-inheritance-tax-rule-youve-never-heard-of.html

[themas]

PP It wasn’t the taper rules I was querying but your two statements:

“beware the rules on serial giving to your lucky nephew - the seven year clock gets reset to the most recent gift”

“Remember the additive rules on serial giving - if you give him 100k now and then 100k in three years - 2018 then the rules say you have given £200k and the clock is reset to 2018...”

To me both these statements are nothing to do with taper relief but to do with the date at which a gift drops out of the IHT consideration. That is 7 years after the gift is given (as the Daily Telegraph article says), so in your second quote the clock does not get reset to 2018 for the £100K given now – it remains at 2015. The only exception I know of is the rather rare case mentioned in the Daily Telegraph article, where gifts are given & further gifts are made later into a trust set up for that purpose.

I’d be interested to know whether you agree.