Buying a holiday let

[slithytove]

I don't know if this is in the right section, but I need some advice please.

My parents do not live in the uk. They have retired outwith the uk and visit for a couple of months a year.

They want to buy a place for them to stay in when they visit. However, they wish to rent it out as a holiday place when they are not here so it washes it's face. They would only need to let it for 2/3 months to achieve this.

They do not want any ties to the uk property wise.

Can they put the property in their grandsons name? What are the implications? Will this affect him if he one day wants to buy a house? He is an infant.

Can any income from the property be put in his name in the same way? They want to start building up a fund for him and thought this would be a good way to do it - as I understand he will avoid income tax under £10k?

What are the tax rules on a holiday let? Do they have to be declared if under the threshold? What makes it classed as a holiday let?

Any and all advice would be very welcome.

Thanks in advance.

And if they paid it rent, it would take it into the holiday let threshold.

Incidentally, how would anyone know they were staying there for free as opposed to mine?

And yes, sometimes mum stays at mine while I'm on holiday, or my sisters, I don't think that (for the fortnight or so) affects gift tax?

Arrrgh it is so complicated! MAYbe they should just put it in my name, then they can stay.

Fwiw, I wouldn't be renting it outwith July and August regardless, mum and dad would only be staying there a bit of June, a bit of oct, and December.

It has to be available on the open market I think. When friends or colleagues rent ours I don't think we can count those periods as holiday let periods.
BUT please go and look it up. Clearly you haven't.

I dont see what the problem is? To buy a house and potentially have it inheritance free and income tax free and Capital Gains tax free is a good deal. To complain about them having to pay rent for the time they are staying in it, is a bit off.

And I dont think they can just buy a house in GC's name (or anyone elses) as there are annual limits to the gift they can give away. Anything over this and inheritance tax is payable, even outside the 7 yea

You need specialist professional advice OP - your questions are very specific and the consequences of getting it wrong could be dire.

I'm trying to look it up and getting very confused by everything that's out there. Cos it's two issues isn't it. The property being a holiday let (which we don't want it to) and the whole ownership scenario.

The property would not be available for rent other than July and August. No matter the owner or the occupancy.

Think of it as a family holiday home.

According to inheritance tax laws and the solicitors my parents went through, there will be no inheritance taxes due on the properties they bought my siblings.

It would be classed as a 'gift with reservation of benefit' but, the property will mainly be used not by them (same as my siblings houses), which makes it exempt. I'm sure this would be different were they not able to prove that they live elsewhere and that they are not in the uk that much.

I will reiterate, if and when it is bought, my parents won't be part of the sale at all. There will also be no records of when they stay there, as opposed to at mine, siblings or with friends.

It's not complaining that my parents would have to pay rent, it's that if they did, it would take it over the 70 day limit meaning the property has to be classed as an official holiday let, which we don't want to do. In addition, we would be very happy to pay income tax if there was any to pay, I've said that all along. Equally, it would only be capital gains tax free if it was in GC's name, the rest of us all own property already.

It sounds like it would be easier if it were not in trust, and then they can stay in it whenever they like, as many grandparents do with their kids and grandkids houses. They wanted to put it in trust to protect it in the event of a divorce, or if one of the GC grew up a bit unsavoury. Though I suppose the GC don't need to know that they own it.

I agree we need professional advice though.

I really do appreciate all your replies, it has helped me to figure out where to start with approaching this and some of the issues we need to consider.

why don't you just book an appt with a solicitor who deals in this type of inheritance/ trust issues?

Surely you aren't going to plunge in on the basis of anon internet comments?

I am not sure about a 'minor' owning a house and profiting from it ( via rent.) Most trusts set up around property are on the basis that the trustees are adults or they cannot benefit from the trust until they are.

There is an annual gift limit of £3K- any more than that or 'giving away' a property to avoid tax or benefit from tax breaks is deemed suspicious and will be challenged by HMRC.

I doubt any UK solicitor would be able to conduct the conveyancing on a house which was owned by a child age 6 or however old they are. It really doesn't add up.

According to inheritance tax laws and the solicitors my parents went through, there will be no inheritance taxes due on the properties they bought my siblings.

I think you are confusing issues here.

Your parents won't pay inheritance tax, but your siblings would if their estates and assets exceed £325K when they die.

But on the other hand , why did your parents buy houses for your siblings? was this to avoid tax ( not inheritance tax, just plain old tax?)

Though I suppose the GC don't need to know that they own it.

This is really silly.
when your DCs are 18 or 21 and start earning they might have to take this into account. If they have income from it they'd need to declare it, and you also need to consider will and probate if ( god forbid) they died young because their assets would go to their next of kin.

OP a simple google threw this up- the same type of question as yours.

First line is important 'a child under 18 cannot own a property it has to be put in trust.'

Tax Questions

My parents bought houses for my siblings as they had some spare cash, and it saved them paying rentals while they were at uni.

They didn't put them in their own names due to capital gains and the laws of being non domicile. I don't think any tax was avoided otherwise.

My siblings won't pay inheritance tax as they have been owned over 7 years and my parents don't benefit from the properties.

If the GC owned the house in trust, any income would go back into the trust. Surely there are children who own property and assets as minors? The trust would not mature until they were well into adulthood. I still don't think we would need to tell DC until they were adults. A 15 year old doesn't need to know.

If we proceeded, we would go via a solicitor of course!

Inheritance tax laws are different for non domiciled people. They need to maintain a way of keeping their non domicile.

New question - can each member of a marriage own a property in their own name, or would this be classed as a second home for capital gains?

I think our posts crossed- read the link I left.

Your DC cannot own a property under age 18. If the property they 'own' is in trust any income over £100 is added to their parents' income and taxed accordingly.

Slithy - that's what I was getting at: go and see a professional for proper advice. It's a complex area and could have serious financial consequences if it were to go wrong.

I am not such a professional, but the more I have read the more I think it sounds as though your parents have money and should just rent somewhere when they come over and set up something for the GC separately.

If the GC owned the house in trust, any income would go back into the trust.

NO- the income is added to their parents income and is taxed accordingly.

save yourself time and use google- or see a lawyer.

Thanks, that link is very interesting.

I wonder if the income tax is reflected on both the parents or just one.

Give it a couple of years and I won't have an income, so that would be ok, it would still be under my tax threshold. I imagine if I was the only trustee this would work.

Again - all this is doing is throwing up lots of useful questions we need to ask. It may be that we rule it out entirely at this stage based on the complications. If not, of course we would discuss with an estate planner.

If my dad can own a property under non domicile laws and my mum can whilst avoiding capital gains, it may be that it can go in my mums name.

My siblings won't pay inheritance tax as they have been owned over 7 years and my parents don't benefit from the properties.

I think you are confused by what I meant.
Your siblings' estates will be liable to inheritance tax when they die, if they exceed the allowance. This will be paid in due course by your nephews and nieces ( your siblings' children.)

My parents do have money, that's not the issue. My mum especially wants somewhere to use as a base in the uk, so my loft and garage isn't clogged up with their belongings and car.

I'm thinking (and thought from the start) involving GC wasn't a good idea.

There is a reason that they haven't bought me a property!

slithy- you cannot have just one trustee.

DH and I looked into trusts a few months back re. our assets and our adult DCs. because our estate would exceed the allowance . You cannot have just 1 trustee- because all trustees have to agree what is best for the beneficiaries. That is one reason why we have stalled on it so far because you need to have complete faith in whoever you appoint as a trustee.

Sorry- but you need to stop 2nd guessing all this stuff and just book an appt with a legal bod.

My siblings are mid twenties and their houses are not worth much, I don't think they are worried about their estate planning yet. They don't have kids or legal partners either.

I haven't even done my estate planning yet, very bad

I don't need to book an appointment if we aren't doing it!

And I'm leaning towards not, certainly not the GC ownership and trusts anyway.

This has given me some good questions to pass to my mum which will hopefully deter her.

your parents must have been very young grandparents if they are mid 50s and have a GS aged 15.
I'm older than them and DCs have just left home!

DGC isn't 15, he is 1 I used that as an example about not telling a GC that they had assets. Different scenario to telling an adult GC. But maybe I'm projecting as I was a rotten 15 year old and god knows what I would have done with that information.

The more I look into it, the more I'm hating the idea, and I think they will have to find another way to do it.

Sadly, capital gains applies to a married couple and one property, they would only be able to each have one if they weren't married.

looks like I have to put up with them and their crap for a few more years

surely the easiest thing for them to do is rent somewhere when they are over here? It's easy enough to book a holiday rental for long term- we did it for 2 months.

They have a car and loads of crap here which lives at mine, they want to be able to store it in their own place.

Also, they have a lump sum they want to use on property, their annual pension while good is not vast, and renting for 2 months would really eat into it.

I'm sure they will find a way to buy while staying within the non domicile laws.

I'm sure you know that holiday lets nowadays are quite upmarket.
If they want to rent it out then it would have to be furnished to a high standard and not full of their 'junk'. Also, I once rented somewhere on my own and the owner had her car in the garage which really annoyed me because she would come and drive it away when I was there which was a disturbance, and it also meant I wasn't allowed to park my car in her drive which would obstruct her access to her garage.

None of this may be relevant at all to your parents but if they want some sort of income from the house then they need to make it attractive.

what kind of figure are they looking to invest? being a bit nosy- sorry- because we are thinking of doing the same in the not too distant future but we would only use it for us and family- not as a business.