Active discussions

Meet the Other Phone. Only the apps you allow.

Meet the Other Phone.
Only the apps you allow.

Buy now

Please or to access all these features

Talk
Property/DIY

Join our Property forum for renovation, DIY, and house selling advice.

Original poster

Tax avoidance? Parent buying house for child on loan.

454 replies

emmalinewre · 15/12/2024 08:48

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!

OP posts:
LittleBearPad · 15/12/2024 10:32

emmalinewre · 15/12/2024 10:31

We already have a mortgage on the house aswell and it says in his contract we can't sell and pay him back - he wants the money each month. I won't be getting any inheritance. I saw a solicitor at the beginning of all this and they said it all looked really suspicious but I couldn't afford to engage them to look into it.

Show quote history

But you cracked on anyway? That was a bold decision.

mummytrex · 15/12/2024 10:32

So what if you also have a mortgage? If he hadn't loaned you the money, your mortgage would be higher and you'd be paying a higher monthly mortgage to your bank. Is he charging you interest?

If it's a burden remortgage for the full amount you need to borrow or sell up and buy somewhere smaller you can afford.

Original poster
emmalinewre · 15/12/2024 10:32

WhatTheFudges · 15/12/2024 09:40

You are the height of ungratefulness!!

£600 is nothing, if I was your dad I’d be kicking you out and selling the property. You need a reality check!!!

The cheek of you!!

We have mortgage as well. I'm asking a genuine question about tax and fraud. He's a bit of a psychopath and I'm worried what we've got ourselves into. Give me a break.

OP posts:
SquishyGloopyBum · 15/12/2024 10:33

How much is your income and what's the mortgage amount? I'm Shepard your lender allowed it too.

It does sound fishy. I don't think the contract is enforceable either in respect of selling.

Original poster
emmalinewre · 15/12/2024 10:33

FiveShelties · 15/12/2024 09:36

I would sell the house and return his 200K. Then I would just find a rental for £600 a month.

Simple.

Good luck.😁

He wont let us sell it - its in the contract he wants the money every month. We have a mortgage on it as well.

OP posts:
CurledUpLikeADog · 15/12/2024 10:33

Get the contract looked at by a solicitor. Whose name is the house in?

SquishyGloopyBum · 15/12/2024 10:33

Sorry that should say surprised.

saveforthat · 15/12/2024 10:34

I don't believe this is real.

Caterina99 · 15/12/2024 10:34

Not being able to pay him back and not getting any inheritance sound a bit strange OP. Not necessarily dodgy though. I can’t see how it’s tax avoidance particularly, but it could be money laundering related

MrsBennetsPoorNerves · 15/12/2024 10:34

Why did you borrow more than you could afford to repay?

mummytrex · 15/12/2024 10:35

Ok apologies ignore what I said re selling/ remortgaging. However you would have known the terms of the contract before signing up. Sounds like you didn't believe your dad would actually collect on the monthly payment. That isn't really his problem if the terms were clear. If you didn't want to agree the terms you shouldn't have accepted the loan.

WinterBird24 · 15/12/2024 10:35

emmalinewre · 15/12/2024 10:31

We already have a mortgage on the house aswell and it says in his contract we can't sell and pay him back - he wants the money each month. I won't be getting any inheritance. I saw a solicitor at the beginning of all this and they said it all looked really suspicious but I couldn't afford to engage them to look into it.

Show quote history

What rubbish. If he has lent you money to purchase your property there’s absolutely no way it cannot be redeemed AND you have managed to secure a residential mortgage too. No lender would think that was acceptable - he will have had to say it’s an outright gift and he will have no interest in the property. Then if its not secured then it’s not really worth the paper it’s written on. Are you suggested he thrust 200k into your hand and you had no option but to accept and repay?

Pull the other one OP.

Property solicitor here who’s dealt with thousands of transactions and never heard such rubbish.

fairydust11 · 15/12/2024 10:35

emmalinewre · 15/12/2024 08:48

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!

Op, are you both working? I only ask as I wonder how it is a burden to find £300 each a month? Surely you were paying more than that on rent previously?

I do not understand why you are wondering about his other accounts. They are his finances, are you trying to imply he is tax dodging so you can somehow get out of the financial arrangement you signed & agreed too?

In my opinion as you feel locked in and controlled financially, sell the house - pay him back & then rent or get a mortgage. Although I doubt the payments of either rent or mortgage would be less than £600 per month…

LittleBearPad · 15/12/2024 10:35

emmalinewre · 15/12/2024 10:33

He wont let us sell it - its in the contract he wants the money every month. We have a mortgage on it as well.

Show quote history

Is his name on the deeds? He can’t prevent you selling your property.

OttersAreMySpiritAnimal · 15/12/2024 10:36

So he'd sue you for breach of contract if you sold up? Can't imagine that would stand up in court.
If it's unaffordable for you either renegotiate the monthly payment with him or tell him you are selling up. And moving to somewhere more affordable and he can have his money back, early repayment of the loan.

WinterBird24 · 15/12/2024 10:38

OttersAreMySpiritAnimal · 15/12/2024 10:36

So he'd sue you for breach of contract if you sold up? Can't imagine that would stand up in court.
If it's unaffordable for you either renegotiate the monthly payment with him or tell him you are selling up. And moving to somewhere more affordable and he can have his money back, early repayment of the loan.

Edited

How would a mortgagee in possession sell - no lender would agree to lend if they could never call in their debt in the event the borrower defaulted. They would also not accept such a restriction on the sale that did not allow them to be a first ranking charge.

LittleBearPad · 15/12/2024 10:38

OttersAreMySpiritAnimal · 15/12/2024 10:36

So he'd sue you for breach of contract if you sold up? Can't imagine that would stand up in court.
If it's unaffordable for you either renegotiate the monthly payment with him or tell him you are selling up. And moving to somewhere more affordable and he can have his money back, early repayment of the loan.

Edited

Agreed. If you pay him back what you owe where’s his loss - maybe interest but given time value of money £200k now is worth a lot more than £600 for the next 27 years.

NoWordForFluffy · 15/12/2024 10:40

emmalinewre · 15/12/2024 10:25

Yeah, we have a mortgage as well.

Show quote history

You over-stretched then. Sucks to be you, but that's not your dad's fault. It would've cost more to borrow the £200k from the bank. If you couldn't afford it, you should've bought somewhere cheaper.

Tiswa · 15/12/2024 10:41

Get legal advice a contract where you cannot sell a house and must pay him monthly is not one that would hold up in court

WinterBird24 · 15/12/2024 10:42

And conversely if YOU have entered into such an arrangement and somehow managed to evade your lenders attention YOU have committed mortgage fraud in not disclosing it. You can’t possibly have disclosed it because it would not be acceptable to a lender.

AlmostFingDone · 15/12/2024 10:45

I see I’m not the first to ask this, but how did you get the mortgage? My experience of mortgages is if a portion of the money is coming from someone else then the lender wants written confirmation from that person that it is a gift not a loan.

WinterBird24 · 15/12/2024 10:45

This reply has been deleted

Message deleted by MNHQ. Here's a link to our Talk Guidelines.

fairydust11 · 15/12/2024 10:46

Sorry, just read your update. I would definitely get a solicitor to look over the contract as it seems strange there is a clause in there to stop you from selling the house.
Plus as the above poster mentioned, did you declare this arrangement when applying for your mortgage?

ribiera · 15/12/2024 10:48

OP you're getting a lot of flak on this, and I don't think people are fully answering your question.
What your dad is doing is tax avoidance at best.
£200k to you means it's outside of his estate, wouldn't be taken into account for IHT, can't be taken into account for any means tested benefits (eg fuel allowance), won't count if he needs to go into a home.
You're then paying it back at £600 per month. Your dad is smart, there is an IHT exemption for any level of gift as long as it's regular income and as long as it doesn't affect your standard of living significantly. So, the repayments are tax free for him - it's not income in the sense that it's income tax. And as a regular gift from you it's exempt from inheritance tax.
If he took that £400k for example and annuitised it or put it in another pension ... any income he drew would be subject to income tax.
If he placed it in a savings account or isa and free from it it would count as part of his estate on death for IhT; or be taken into account for any care fees.
So essentially he's using you to confer a tax benefit and reviving £1,200 in legitimate tax free money.
Which isn't illegal... it's borderline. And also he should have fessed up and told you in advance.
Presumably you're getting a good deal too - Ie paying less than you would for a £200k mortgage?
Here's the thing - the fact that a solicitor looked at it and said it was dodgy, probably means it's avoidance. Which may mean if you want to stop paying, or just pay back the whole thing you could do. Because your dad can't make you sign a contract for something illegal and then take you to court, can he? Get proper legal advice.

ribiera · 15/12/2024 10:48

Oh and also - when I said at best it's tax avoidance, at worst it's something much worse - money laundering

Swipe left for the next trending thread