Tax avoidance? Parent buying house for child on loan.

[emmalinewre]

Hi!
A few year ago my dad gave me and my sibling £200k each to buy a house each - on the condition that we sign a contract with him paying him back £600 per month on an ongoing basis.
Friends at the time were pleased for us, we're very lucky to be on the propery ladder - I appreciate all that.
However, it has become rather a burden as that is a lot of money a month to find, and I suspect this is some sort of way my dad can avoid tax - as he refers to these monthly payments he gets from us as his 'income.'
He also has around ten different savings accounts, some in the UAE, which seems a bit shifty.
Can anyone with knowledge of tax/similar advise as to how he may be benefitting from this arrangement?
My sibling thinks its all great and he's just a wonderful parent, but myself and husband feel rather locked in and controlled financially by the situation - and with no way out as its not as if we can buy out of it.

Thanks!

Yes, I agree.

How old is your dad, OP, how old are you?
How much is your monthly mortgage (not the repayment amount to your dad)?
I would very much like OP to update us in 6months & 18months time.
What happens to this loan if he dies tomorrow, does his estate carry on getting the £600 for decades? Are OP & her sibling among heirs to the estate? Does that £600 include interest or does it just steadily lose value against inflation?
I also agree that the apparent contract terms (cannot ever pay back) is unenforceable if it is predicated on any illegal activity.

@Toddlerteaplease @Dontwearmysocks please RTFT. OP does not have a house for £600pm. OP has a mortgage of (undisclosed figure, probably another £600-£800pm repayments if it's an average house) plus the £600pm committed to paying to her dad making monthly outgoings for housing of £1200-£1400pm when it sounds like she can only really afford about £800-£900pm because she fraudulently borrowed more than she could afford by pretending the £200k was a gift not a loan.

Well if her dad signed forms to say it was a gift and it isn’t - which we’ve established it’s not, there’s still a fraud because they’ve misrepresented the facts to the lender. They’d have needed to disclose it is a loan, because if is.

The lender usually asks -

1. Is it a gift with no clawback provisions;
2. Will the giftor have any interest in the property; and
3. Will the giftor be living at the property.

If the borrower can’t satisfy those three criteria it’s not a gift.

I know. That was my point!

I see - I misunderstood.

You're making a lot of assumptions, many of them incorrect.

If OP used the £200k to buy a house, her solicitors will have done the money laundering checks to establish where the money came from.

If DF is calling the money income it does not make it taxable; if the original £200k is an interest-free loan then this is simply repayment of capital and no interest is payable. If the loan has an interest element then tax may be payable on the interest element, but not on the capital element.

IHT planning will often involve a parent gifting sums of money to their beneficiaries prior to death. This only becomes an issue if it's seen as deprivation of assets, ie they don't have enough money to live on or pay care fees if the need arises.

You will have a hard time finding somewhere to live for for less than £600!
If it is tax avoidance, who cares? Better he keeps his earned money than our greedy government!
X

The OP doesn’t seem interested in returning or answering any of the questions that have been asked.

Yes, I wonder why that would be 🙄

What a fool she was for not bothering to look into this properly for a solicitor before taking the money.

Suited her not to at that point as she wanted the money! 💰

Not read the full thread, though I have dipped in at various points.

Just to say:
Tax avoidance isn’t a crime. Tax evasion is.
If the father invested the money or put it in a savings account, income would be subject to tax or CGT, depending on how it was withdrawn. Not if it’s not income but children paying him back money he has lent them.
Looking at it charitably, the father came up with a way of helping his children while deriving a tax free ‘income’ from his capital, although he is not retaining that capital but paying it down.
We don’t know how it was represented when the OP got her mortgage, but it is telling that she has only now decided that it might be dodgy, when she’s finding the repayments too much to cope with. Her brother perhaps had a smaller additional mortgage or none at all.

More likely IMO is she was happy with the set up at the time but has now decided she is entitled to a better deal and is trying to frame it that way.

She got a mortgage based on her £200k deposit - she had to declare to the bank where the £200k came from and her father had to provide source of income. This was my case when my dad gifted me the deposit money for purchase of my flat. We had to show that the money came from his savings made on employment income etc there’s always a paper trail if you get a mortgage with the bank and show where the deposit is coming from.
OP - it’s funny how you were happy to get a house of the value £200k plus whatever your mortgage is and now you’re trying to find something dodgy about your dad to get out of the payments.
maybe go to the bank and tell them you’re struggling with the mortgage payments and see how that goes for you.

Wow you ungrateful a**! You basically have an interest free mortgage and all you’re concerned about is if your dad is getting something out of it! Where do you think you could live, even if you rented, for £600 a month? Do you even live in the real world? If you can’t afford £600 a month, you had better move into a rented room or back home with mummy and daddy.

@lyraloo wow you nasty piece of work not shouting all that bile when we have a mortgage as well, which a cursory glance at the rest of the thread would tell you. FFS!
How about making sure you understand the subject before getting all high horse about things. Classic mumsnet resentment.

Weird how you appear now and not when you've been asked loads of other questions.

Think we all know why!

I didn't do anything 'knowingly'
I'm not trying to get out of anything now.
I'm just concerned I might've unwittingly taken part in something illegal.
More has come to light about my father since I signed this contract, which was before a solicitor looked at anything.
I have a mortgage as well.
The 200k was declared to the bank when I applied for my mortgage.

Fucking hell you guys are psychos.
Thanks for your 'help.'

So now the story’s changed and a solicitor looked at the contract AFTER you signed it?

You chose to sign the contract. You chose not to check it out beforehand. You took on a mortgage on top of the loan. But somehow it’s the fault of the “psychos” on Mumsnet.

Repent at leisure, and all that....

And peace on earth to all

The story hasn't changed at all!
I said the 'beginning of all this.'
Not before I signed it.
🙄🙄🙄

still waiting for confirmation of total repayable, over how many instalments, and therefore is interest being charged or not?
Until you clarify that there is no real evidence that there is anything "wrong".

You have now confirmed that you declared this second loan to the bank when you took a mortgage with them, so the only thing you are actually moaning about is the fact you have to regard it as "dodgy" that he did not gift to you, but is instead making you pay it back. Entitled much?

Declared as a loan or a pretend gift? If the former, your mortgage co would've had to know the terms and seen the contract, did you show them?

@Wot23 what? I didn't expect him to just give it to me. Where did you get that from?
Wtf are you talking about?