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bigduckontax
bigduckontax, Accountant
Category: Tax
Satisfied Customers: 4429
Experience:  FCCA FCMA CGMA ACIS
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I am fortunate enough to have some spare cash that i would

Customer Question

I am fortunate enough to have some spare cash that i would like to loan to my parents so they can put it into a savings account in order to get them some interest for pocket money the loan from me to them would be interest free but re-payable on demand.
question is if anything should happen to them ) how would i prove to the tax man that the money is mine and not a gift from them under the 7 year inheritance regulations they do not charge CGT on my own money.
Submitted: 3 years ago.
Category: Tax
Expert:  bigduckontax replied 3 years ago.
Hello, I'm Keith and happy to help you with your question.

Make sure that the loan is evidenced in writing. The statement should indicate the amount of the loan and specify the interest to be paid [none in this case] and the repayment schedule. In the unfortunate event of your parents' demise then you can present the document to their executor and get your money back. This will also protect the moneys from inclusion in Inheritance Tax calculation as a gift.
Customer: replied 3 years ago.

should the document be signed by an independant witness or will myself and parants suffice

Expert:  bigduckontax replied 3 years ago.
You could have a witness, never a bad idea. It is not essential, however.
Customer: replied 3 years ago.

could you please give me some idea how to word the document.

Expert:  bigduckontax replied 3 years ago.

It doesn't have to be terribly formal; try this.

 

LOAN MEMORANDUM

 

I, XXX XXX, hereby loan YYY YYY the sum of GBP NNNN for ultimate repayment. This loan bears no interest and there is no repayment schedule although one may be imposed by the lender from time to time.

 

Signed : XXX XXXX

 

Signed: YYY YYYY

 

Witnessed by: ZZZ ZZZZZ

 

Date. : DD/MMM/YYYY

bigduckontax and other Tax Specialists are ready to help you
Customer: replied 3 years ago.

Thanks for the advice. excellent, your help much appreciated.

Expert:  bigduckontax replied 3 years ago.
Thank you for your support.