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Original poster

Buying a holiday let

138 replies

slithytove · 30/07/2014 13:23

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.

OP posts:
warmmeup · 31/07/2014 18:03

There seem to be so many 'wants' here but not too much being practical.

You are saying they want to leave something to the grandchildren? Why does it have to be a property? Why don't they just leave them the cash- via their wills? Amounts to the same thing.

Given that your DC is 1 year and your parents are younger than me, it seems premature to be thinking of what your DC will be left when they may eventually need that income themselves for nursing home care, operations, houses and god knows what over the next 30-40 years.

They won't be 'renting' as such in the UK; they'd be holidaying and should see it as an income they'd spend if they were doing the reverse- living in the UK and then visiting family overseas for a few weeks a year.

caroldecker · 31/07/2014 18:04

Income to a trust set up by GP for GC is not taxed as parent's income, only when the parent's set up the trust.

There is no rule to say that non-UK resident or domiclied people can only own one property in the UK, they can have as many as they like - the rule is about how much time they spend in the UK.

HMRC doc here

Original poster
slithytove · 31/07/2014 18:05

Non doms can actually, it's all legal. They aren't looking to break the law here.

If it can't be done legally, they won't do it. They are not going to waste 20 years of non domicile sticking to the letter of the law just to have a holiday home.

It's just their current property (our old home) is many miles away and not practical for them to stay in.

I don't think they are being awful in wanting to not rely on my hospitality each time, especially considering my family is growing - 6 weeks to DD2 Grin

OP posts:
warmmeup · 31/07/2014 18:06

carol- I think the discussion was over whether any income from a property owned by a child would be taxed. The info I saw said that any income a child made was taxed as if the money was earned by their parents. It's not quite the same thing- but I could be wrong.

warmmeup · 31/07/2014 18:09

Put this another way OP- we have family in another part of the country, 5 hours away from us.
They don't have enough space for us and the 2 DCs when we visit. We rent somewhere nearby - up to an hour away.

But I'm confused now- you say that they have a property- a current one- which was your old home???

Original poster
slithytove · 31/07/2014 18:09

My parents won't need £350k for houses, nursing care or care homes. And it wouldn't be in this country at any rate.

They are currently doing their estate planning, and GC are part of that. Not least because it avoids inheritance tax on my eventual estate!

I'm not being cheap, I'm investigating something in the very early stages, and I've said several times just off the back of this thread that I've ruled out a few ideas. I think that's useful.

Again, they would only want to let the place in July and August. They come for Christmas, and a bit of time in June and sept/oct.

They are here right now but that is because of baby being due.

They are not avoiding uk taxes using an elaborate scheme. Being non resident and non domiciled is all entirely legal. Right now, there are no taxes for them to avoid!

Carol, I will look at that link, thanks

OP posts:
warmmeup · 31/07/2014 18:12

My parents won't need £350k for houses, nursing care or care homes. And it wouldn't be in this country at any rate.

How can you possibly predict the future?

Or is what you mean they have so much money that the £350K is small fry, disposable, and there is plenty more? If they went overseas to avoid tax and now want a bolt hole in the UK they should blinking well pay up.

Original poster
slithytove · 31/07/2014 18:12

Yes, they have one property which they are allowed under the laws of non dom.

They don't want to sell as it's not liable for capital gains. Yet.

They were hoping to be able to get a second, avoiding capital gains and breaking non domicile by legally putting it in a relatives name, but it is looking too difficult!

So they can't have one. Which is fine.

OP posts:
warmmeup · 31/07/2014 18:16

I'll tell you something which you appear not to know. At the moment a child who inherits their parents' estate can alter their deceased parent's will and give some of the assets to the grandchildren, bypassing the parents. So if they left you £5million as an example, you could change their will and leave £4m to the DCs and it's all legal.

warmmeup · 31/07/2014 18:19

They don't want to sell as it's not liable for capital gains. Yet

eh? Surely they ought to sell before it's liable for CG? Not when it is????

Original poster
slithytove · 31/07/2014 18:27

They didn't go overseas to avoid tax! They have worked out there for 20 years and have just retired. They have homes and lives out there.

Their current property in the uk will be liable for capital gains if they don't live there again. So it depends if they can live there and maintain non dom. If they can't, they will pay capital gains when they sell it. But that's not in the pipeline at all.

They have enough money to not worry about care homes and nurses, yes. Provision has been made for their declining years already.

They really don't want to fuck the uk over. But neither do they want to lose out if it's legally avoidable. And there is nothing illegal as I understand it about buying someone else a property.

And as I've said, many times, they don't want to break the law.

No I didn't know that warm, very interesting and I will pass it on!

OP posts:
joeandella · 31/07/2014 18:52

I'm not being funny but the rules of non-domicile have changed a lot in the last year.

They ought to seek advise before they do anything.

caroldecker · 31/07/2014 18:56

I meant they could own as many uk properties as they like and still be non-dom - you need some proper advice on this as there are no hard and fast rules on non-dom status. However, I would suspect it would be difficult to claim that the only or main home is in the UK (required to avoid CGT) if you are non-dom (having initially been UK dom).

warmmeup a child's income is only taxed as a parent's if the parent gave them the money - for GP is ok. here

Original poster
slithytove · 31/07/2014 19:00

They have plenty of current advice on their non domicile status and it's all above board.

We aren't sure if they can avoid CGT, it's not yet relevant though as the flat isn't getting sold any time soon. If they find a way to live in it and maintain non dom (e.g. After revoking citizenship), they can avoid CGT.

This has become very convoluted Grin

I think it's safe to say they won't be buying a holiday home in the uk any time soon.

OP posts:
warmmeup · 31/07/2014 19:10

Carol
This link is specifically about taxation on the proceeds of owning property
it doesn't seem to mention GPs

www.property-tax-portal.co.uk/taxquestion61.shtml

OnIlkleyMoorBahTwat · 31/07/2014 19:26

Do you live in an area where there is demand for holiday lets? who is going to manage the bookings, changeovers etc - an agent or you?

If it is in the name of your DCs, what happens if they end up bankrupt as adults - could the property be lost.

Can your parents rent a self storage place as an alternative and accommodation when they are in the UK if you don't have room for them.

Remember that if they buy a property they have to account for lost interest on savings and investments, maintenance, bills, agents fees, stamp duty and fees for the purchase and trust etc, with no guarantee of capital appreciation the expected rental income.

Original poster
slithytove · 31/07/2014 19:45

I would manage the bookings but use a cleaning agency. There is enough demand to get it rented over the summer holidays.

They don't want to rent, they are quite clear on this point. And id feel terribly guilty. I do have room, I just don't want them here all that time Blush

I didn't really understand your last point I'm afraid, they are wanting to buy a property to own for the next 30/40 years - they aren't concerned with immediate appreciation or rental income persay.

As for the bankruptcy thing, I don't know! Interesting question and if my DC are ever in line for a trust, I would find out. I would hope that anything in trust is protected until it matures. Can a trust mature when someone is 50? Grin

I really don't know how families with real inherited wealth, titles and estates etc manage it all.

OP posts:
caroldecker · 31/07/2014 19:52

warmmeup

Quote from your link, my highlighting:

Any asset owned by a child under 18 and unmarried, derived from the property of the parents that produces income of more than £100 per year, is taxed on the parents as the parents income.

warmmeup · 31/07/2014 19:54

I really don't know how families with real inherited wealth, titles and estates etc manage it all.

They sell tickets for people to look round and picnic in their gardens- to pay off the inheritance taxes.

Suggest you read the book by the Duchess of Devonshire where she describes how they saved Chatsworth.

But- your parents don't sound exactly badly off- 3 homes and a Porsche and retiring mid 50s? Living the dream, I'd say :)

warmmeup · 31/07/2014 19:56

carol- I know.

But as a child cannot own a property anyway- not in their name- it's irrelevant.

Original poster
slithytove · 31/07/2014 20:01

My parents have done brilliantly from pretty poor backgrounds, I'm so proud of them and grateful for how they have helped us. I understand why they want to protect it.

OP posts:
joeandella · 31/07/2014 20:16

'Again, they would only want to let the place in July and August. They come for Christmas, and a bit of time in June and sept/oct.'

OK, you'll only really get 8 weeks letting,
If you think you can get enough money from the 8 weeks, go for it.

joeandella · 31/07/2014 20:17

By the way, if they are retired why the big thing about being non-dom?

Seriously, the UK only taxes you on earned income.

You do not appear to have a full grasp on your parents situation, or the current UK tax situation.

Original poster
slithytove · 31/07/2014 20:42

They are retired.

Doesn't mean they won't have earned income. In about 2 years, they will. Lots.

And considerable assets which as non doms are not subject to current uk inheritance laws.

OP posts:
Original poster
slithytove · 31/07/2014 20:50

My parents have no ties to the uk other than citizenship, and I don't know if they will keep it, and family living here.

If we didn't live here, they wouldn't want to come back.

They have taken nothing from the uk for many, many years now. At least 15 of the 20 they have been abroad.

Why should they give anything back?

OP posts: