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Joshua
Joshua, Lawyer
Category: Law
Satisfied Customers: 25358
Experience:  LL.B (Hons), Higher Prof. Dip. Law & Practice
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My fathers business closed today. After a long running dispute

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My fathers business closed today. After a long running dispute with the council on a water ingress issue they served notice to evict. He hasn't paid rent on the property for some time, and he also owes VAT. The amount is £70k. Whilst there is currently no legal action to recover the rent it is expected. If I've understood it right at that point his assets will be frozen? He is seeking to transfer his flat into my name to protect that asset from action. I am a chartered accountant. If I accept that house as a gift, leaving him with the right to live in it until death, am I committing an illegal act or an act that would get me removed from the register of accountants?
Submitted: 2 years ago.
Category: Law
Expert:  Joshua replied 2 years ago.
Hello and thank you for your question. I will be very pleased to assist you. I'm a practising lawyer in England with over 10 years experience May I clarify if your father was operating as a ltd company or a sole trader please?
Customer: replied 2 years ago.
Sole trader
Expert:  Joshua replied 2 years ago.
Many thanks. if either the council or the revenue take action to recover monies owed under rent or VAT respectively, they can either issue proceedings in the County Court or alternatively present a bankruptcy petition following a statutory demand. Your father's asses would not be frozen until enforcement action is sought to seize heis assets following a county court judgement or a bankruptcy petition is granted unless the creditor applies for an interim freezing order prior to judgement or the bankruptcy petition which is relatively uncommon.there is nothing preventing your father transferring his flat to you if there is no mortgage on the property. If there is a mortgage, then transferring his flat would also entail a remortgage of the property unless you can pay off the mortgage with your own capital.However, transferring the flat may not work because of Sections 336-349 and Sections 423-425 Insolvency Act 1986. this legislation provides that transfers at undervalue which obviously includes gifts, made at a time when the transferor or knows of circumstances whereby he is likely to be made insolvent can be set aside by the trustee in bankruptcy for a period of up to 5 years following the date of the transaction. If you were to pay market value for the flat this would not be possible but of course then your father would have the money you have paid him. You need to bear the above legislation in mind in respect of any gift your father decides to make to you of the flat as it could potentially be reversed by a trustee in bankruptcy for a period of up to 5 years.Otherwise, there is nothing unlawful in you accepting a gift of the flat therefore cannot see it would impact on your professional standing.I hope the above is of assistance? If you have no further questions for now I should be very grateful if you would kindly take a moment to click to rate my service to you today or just reply back to let me know if the above is helpful. Your feedback is important to me. If there is anything else I can help with please reply back to me I'd be very grateful
Customer: replied 2 years ago.
What is the likelihood that the transfer will be reversed?
Expert:  Joshua replied 2 years ago.
If there is significant equity in the property and your father has in sufficient alternative assets to settle debts and he is made bankrupt, I fear an application to satisfied the gift within two years of the date of the transaction is highly likely. Such an application is relatively standard practice by a trustee in bankruptcy. Between years two and five, the trustee would need to show that your father knew that he was likely to be insolvent at the time of making the transfer at undervalue in order to be successful in setting the transaction aside but in the circumstances, this may not be overly cumbersome to demonstrate. The transaction would not be entirely safe until five years has elapsed from the date of the transaction.I hope the above is helpful? Can I help you with anything else or has the above answered your questions satisfactorily? If you could drop me a quick message to let me know I'd be very grateful.
Customer: replied 2 years ago.
Thanks. This is helpful. If they did make an application then what would the process be for them to recover the house? And, would I be liable for any more?
Expert:  Joshua replied 2 years ago.
the trustee in bankruptcy would initially make contact with the owner which in your scenario would be you and ask if you would like to buy your fathers equity in the flat. He would likely offer you a discount on the true value of the equity for the simple fact that it would cost the trustee money to make the applications for an order to set aside the transaction. You could submit a counter offer which he may accept or if you decline then assuming there is sufficient equity to justify the mid to high hundreds of pounds of costs he would likely consider proceeding with an application to the county court to set aside the transaction under the above sections of the Insolvency Act. If granted the order would transfer the equity in the property to the Trustee and a restriction would be placed on the title. Control of the asset would pass to the Trustee and any person living there or tenant may be asked to move out or failing which any rent paid would be instructed to be paid to the Trustee. The trustee would then in time likely look to sell the property to raise funds to repay creditors. Have I been able to help you with all of your questions?
Customer: replied 2 years ago.
Yes I think so. That's been very helpful and informative. Thanks.
Expert:  Joshua replied 2 years ago.
A pleasure. I hope that the matter works itself out positively.
Joshua, Lawyer
Category: Law
Satisfied Customers: 25358
Experience: LL.B (Hons), Higher Prof. Dip. Law & Practice
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