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.

joeandella - UK taxes you on unearned income as well

warmmeup - property there means any assets, not just land and buildings

slithytove If they earned abroad and retired abroad, no reason they should pay UK tax, page 43 of this suggests they are not liable for CGT anyway

I still don't get it.

What country are they in at the moment?

Yes the UK does tax on unearned income - but if its a couple they would have to be drawing pretty substancial pensions for it to make a difference.

Their pension was taken as a lump sum and has been spent. And it wasn't a uk pension anyway.

I don't want to say their country, sorry.

They will be earning an income shortly, just because dad has left his job and officially retired doesn't mean they won't be working in some capacity. They are still young.

It doesn't have to be a huge pension to be taxed- you each have your personal allowances but after that you are taxed at 20 or 40%.

DH will have a 40% tax on his pension and it's not huge by any means.

slithy- while our parents are over here they need to make an appt with a sols who is able to advise on both estates and taxation, and trusts etc.

It's likely they are going to have to suck up some tax implications on some of this but it's far too complex for anyone here to advise.

As a BTW you sound a super DD- you must be around the same age as my DCs and TBH they'd expect us to be doing all the investigating on this- we'd not expect them to do the leg work for us!

Thank you, that is a kind comment!

They are very preoccupied with their retirement plans right now, and my mum in particular is struggling with living on the other side of the world, the life currently is not easy (lots of building work) and she doesn't like being away from her elderly dad and her new GC.

So she has a habit of jumping in with both feet to situations which look great on the surface, but really have massive implications to things which we have been discussing in the thread. Rather than bother my dad who has so much on his plate, I would rather do a bit of research and gently dissuade her, or find a better way to do things.

As it turns out, it may be possible for her to own a property, maintain non dom and still not be liable for CGT, she would just have to not rent it out. I'm going to look into it more but that seems the easiest solution!

I have 'gently' suggested until I'm blue in the face that they need to speak to an estate planner, but my mum is very much head in the ground about death etc. I will approach it with my dad in a year or so when their project is nearer to completion, he is much more pragmatic.

I have found this thread so interesting, and really appreciate everyone taking the time to reply.

Hello,
I found this on another site which might help.

"Question
We are considering buying a property, which will be let. Is there a way to buy this property for a child who is 13. Is it possible to put it in some form of trust for your child in order to decrease the tax burden. For example CGT tax etc.
Arthur Says
A minor under the age of 18 cannot own land or property in the UK, so it would have to be owned in trust by trustees, e.g. parents, for the beneficial ownership of the 13-year-old.
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.
However this doesn't apply for CGT purposes.
One possible solution is to create a ‘bare’ trust. A ‘Bare’ trust can be created where that the child is the beneficial owner, and the parents are the legal owners who hold the property effectively as nominees. When the property is sold it will be taxed only on the child (who will have their own CGT annual exemption, and perhaps lower tax bands - if they don't have much other income) and not on the parents.
But it must be remembered that the child cannot be prevented from having the property put into his own legal ownership at age 18."

Why don't they just rent a secure garage for their car and belongings? They're around £120 p/m around here, then rent when they visit?

They don't want to rent

Bit left field , but, if they have bought your siblings' houses but not you , and they are young and likely to live way over the 7 years , could they give you the money and you move to a larger house possibly with a little granny annexe type thing (where they can store their stuff) and a bigger garage (to stash the porsche). That way they are giving money to you (and by implication the GCs) and not impinging on you so much when they come to stay. I AM NOT A SOLICITOR. But this seems to me much simpler.

I suppose it would be, but I love our house, love the independence we have financially, and I'm married so it's not quite as simple as just buying a bigger house.

I suppose it's something we could discuss when my fixed term is up for the mortgage - it's not something I'd considered before.

The saddest thing I have read on this thread is that your Mum is so sad to live on the other side of the world as she misses her elderly darling dad and grandchild to maintain some sort of tax status - I am heart broken for you all.

They seem to have so much money - but want to hoard more - nothing can put a price on the magical moments with babies and as for her elderly father --- I am lost for words - my Mum and Dad died very young (Mum in her 50's Dad in his 30's)....I would move into a cardboard box at the side of a motorway to have another day with them.

Life is short - make it sweet - all that matters is love....don't waste another minute...I cant imagine the heart break for your Mum of having to get on a plane leaving her elderly Dad, Children and Grandchild - to save a few quid....This is the sort of emotional turmoil economic migrants have to endure to in the 3rd world just to earn money to send home to feed their children - and your family make this a proactive choice?

While all that is true deepest adults near/past retirement have a full life where they have lived for most of their adult life and would miss their friends, activities, medical practitioners etc. My DM would not move to where my brother lives due to lifestyle and cultural barriers, but she loves the town we live in though thankfully would never move here for all those reasons. She has her Grannies' Circles, her volunteering, her weekly outings, her arty pursuits - she's much busier than I am and that keeps her sane.

They have lived abroad over 20 years. We did for many years as well and none of us intend to settle in the uk.

It would be a waste of earning non dom status to come back now for the sake of a couple for years. We won't be here, and grandad won't be around forever.

And mum will be much happier when their projects are complete, money is being earned and she can go back to where she used to live. (Metropolitan city as opposed to 3rd world country).

She has friends, a home, a job, a company in that city. She is happy there.

She is here at least 2 months of the year and manages to extend it by spending time in Spain and Ireland too. And we go out there.

It is just a temporarily difficult time. And I think I've helped her find a way through it.

Home is where the heart is - these next couple of years will be the most deeply rewarding of her life - the babyhoods of her two precious grandchildren will flash by in the blink of an eye.... "and grandad wont be around forever" - oouch - exactly.....I wouldn't trade a second of this time - you cant buy it back with your tax savings.....

but your Mum, your life, your family values....I think everyone on this thread has been very patient with you when all you are out to achieve is to avoid capital gains tax, avoid income tax, avoid IH.....as well as avoiding paying for professional legal advice.

"....and my mum in particular is struggling with living on the other side of the world, the life currently is not easy (lots of building work) and she doesn't like being away from her elderly dad and her new GC"

"It's just their current property (our old home) is many miles away and not practical for them to stay in".....just sell it then and buy another near you so that they can transfer and maintain their entitlement to no cgt on a single UK property .....

However the could of course get divorced and each have a entitlement to no cgt on a single UK property....which might achieve your original objective of transferring into a relatives name to avoid cgt....how far does your greed and tax evasion go?

Thanks.

No one is suggesting they divorce, it's a statement of fact about the system. I personally don't see why unmarried partners are treated differently in that respect.

It's not tax evasion in the slightest, they are not liable for uk taxes as they are non domicile, they just don't want to fuck up that non domicile status. Either of them.

And this thread is about buying a property and maintaining non dom and the tax implications, nothing to do with emotions. If I wanted advice on that i would post elsewhere. But I don't need advice on that, I help my mum just fine without it. Plus, she sees DGC way more than his other grandparents, she is hardly deprived. If she lived here, it would be unlikely to increase.

In addition, if they sold, gave up their hard own visas and residencies, gave up all their retirement plans which have been their dream for over a decade, and came back to the uk, domiciling here - what on earth would happen when we do move away with the grand kids? They could hardly follow. You are being short sighted.

They don't want to and can't sell the family home yet, at least not without paying big mortgage penalties. Plus, it brings them income, why would they choose to get rid of that while dad isn't earning?

Home is where the heart is, yet mum has been happy for 10 years now living abroad without her kids. It is only since they retired it has become an issue. A common thing in retirement I suspect and luckily for them, temporary.

You are paying no heed to my dads feelings by the way. Or does only your perception of my mums matter?

And for the millionth time, THEY (not me, or have you not noticed that? It's not my money or plans, it's my mums) are not avoiding paying for anything. IF they chose to proceed, all this thread has done has given us a better understanding of which avenues to research prior to seeking advice. And as it stands, we have now ruled out the ideas of a trust. So they didn't need to pay someone to decide against that idea.

Thanks for your measured and polite posts though, very useful. You don't really know what you are talking about I'm afraid.

How can there be big mortgage penalties on a family home that they have not lived in for 15-20 years.....whilst they have £350k cash available for another property? Doesn't add up to me.....

Living away from independent child free adult kids is fine - but there is a specific time in life when you need and want to breath in the magic, love and emotion of your young grandchildren and be around to care for your elderly parents at the end of their life - this is a short window.

...and it may not coincide with the perfect timing of the most tax efficient scheme.....but it looks to me like your Mum just wants to be part of this - now. To be near her loved ones for part of the year and to live in comfort whilst she is doing this....why cant she do this ? because someone might have to pay a % cgt IF any profit made when sold years down the line? Or because if they bought it as a trust - the trust would have to pay income tax on any profits - god forbid - any tax was paid on a % of any profits!

I have not suggested that they throw away their non-dom status - just that they could sell their "family home" (which somehow makes them money - must then be BTL?) and buy a "family home" near you....this would avoid cgt....which seems to be the goal -- but again money excuses come back into it.

They didn't need to pay for professional advice about trusts because you got it for free here...!! you have taken a decision about how to invest £350K on the back of a few anonymous amateurs - now that is short sighted!!

You are the one who mentioned your Mums feelings and chose to omit your Dads.

Remortgaged last year. Not a difficult concept. Yes, BTL and they need it as income. Call that a money excuse if you like, but they need that income.

No one had an issue with paying income tax if it was liable. But why should DH and I, or our siblings alter our financial situation?

I don't think it was realistic for them to do it in the name of DGC. Meaning they would have to do it themselves.

And for the sake of two years or thereabouts, they do not want to become domiciled here. Either of them. Why is that so hard to understand?

I don't think any decisions have been made about how to invest £350k. Which doesn't exist yet, they would have to find it, IF they found a way to do this.

Rather, putting it in the names of DGC has been ruled out. Which is hardly short sighted.

Also, I don't know why you are taking an attacking tone with me.

I haven't chosen their lives for them. Haven't chosen for them to be non dom, the country they are retiring in, didn't choose retirement, and have no say on what they buy wherever it is.

But I know my mum is prone to whims and my dad doesn't need the stress. And when she talks about it impacting my DC, I want to find out if it's wise.

And if I can give them extra help or advice along the way, I will. But if they want to do something, they will, regardless if my thoughts or opinions.

So your assumptions that I am greedy, I want to avoid paying money, my family values are wrong etc - totally misplaced and unfair.

I couldn't give a flying fuck what inheritance they manage to protect except for the fact that it matters to them. They want to protect what they have slogged their guts out for. And I respect that.

deepest - calm down dear and step away. this has nothing to do with you, you obviously don't approve. stop attacking the OP and go and make some tea

Crikey- feelings running high here.

OP- there are some discrepancies in your accounts which is why some posters are becoming urked.

I'm not sure how old you are, but I'm older than your mum, still working and feel she is very young to be taking on the 'retiring' mindset. I don't mean she should keep working, but you say she is whimmy and maybe at the moment at a bit of a loose end- maybe this will pass and the 2nd home in the UK will take a back seat?

I have to agree ever so slightly with a PP who seemed to suggest that your mum wants to 'have it all' but without any financial costs ( ie tax.)

I think the problem with your thread here is that you have given some information but not enough for people to really advise.

Your parents seem on the one hand to have a lot of dosh, but on the other to have been short sighted. You say they need the income from their home in the UK which is a BTL, and there would be a penalty is they sold it. The actual penalty of paying off a mortgage early is usually quite small - a few £thousand.

In addition, it's an odd life choice to retire early yet need the income from a BTL in order to make ends meet. There is always the risk of losing tenants and the market crashing when it's time to sell up.

I don't want to pry but if your parents have lived on the other side of the world for many years as you said, then either you went to boarding school or came back to the UK at some point as an adult. Surely the realised that one day you might move away and there would be an issue with access, visiting and the best options?

They don't seem to think far ahead - which is maybe where you come in trying to 'parent' them.
Just a thought- but they need legal advice and I don't know why they don't get it first.