Business & Finance

potentially exempt transfers

I am buying a house with my partner, and my 95 year-old grandfather has pledged £25,000 towards the purchse. He is worried about the tax liability, and wonders whether making the cheque out straight to the estate agent, rather than to me, would mitigate his liability? I told him that I thought there would be implications for that, i.e. his interest in the property would have to be declared and that portion of it would be counted as part of his estate .... but any advice most welcome.
If he writes the cheque out to me and then dies within 7 years, I am assuming that £6,000 of that would be tax-free (i.e. this year's tax-free gift allowance plus last year's) and that the rest would be taxed as part of his overall estate at 40% (his estate is well over the threshold). If so, does anyone know what the sliding scale is, i.e. if he lived another 2 years, what proportion of tax would I be liable for?

Ellie2008 Wed 23/07/08 10:18

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Tom Braider
Wed 23/07/08
11:51

I don't think it works like that, I'm afraid. I'm a bit wobbly on IHT but I think that, although if your grandfather were to give you £3000 a year it would be exempt for IHT purposes, a single gift of £25000 would, as far as i know, not even get that. Your grandfather's estate would be calculated as if the whole £25000 was still part of it. As for paying for part of the property, rather than simply giving you the money, I think you're right; he would acquire an interest in the property which would form part of his estate for tax purposes. Try HMRC's Inheritance tax helpline - 0845 3020 900

Twenty20
Wed 23/07/08
15:41

Leaving aside the inheritance tax, please don't let him write a cheque for £25,000 to the estate agents. They'd think it was Christmas and their birthday all come together!

R1Geezer
Wed 23/07/08
15:55

There is no such thing as "Gift tax/allowance" he can give you any amount tax free. The issue becomes relevant when death occurs within 7 years and then IHT rules kick in. however in this cae you say he's paying 25K and will "own" a proportion of the house so the land registry will show whatever proportion that represents. therefore he is not "giving" anything. The share of the house, whatever percentage will be part of his estate on death and that's another subject.

Oh and for christ sake do not write a cheque for £25k to the estate agents, they'll pi55 off to Barbados and you wan't see their ar5es for dust!

Ellie2008
Wed 23/07/08
16:17

Question Author

I'll definitely dissuade him from writing it out to the Estate Agents: that you for your strong response on that one.

cassa333
Thurs 24/07/08
08:52

He would have to make the cheque out to the solistors and they will have to do an identity check.

My mil gave us 80k towards our house but she has the same initials as me so they thought it was mine anyway.

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