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Sam
Sam, Accountant
Category: Tax
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Experience:  26 HMRC expertise, PAYE, Self Assessment ,Residency, Rental Income, Capital Gains, CIS ask for Sam Tax
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My Grandmother signed her property over to my brother and

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My Grandmother signed her property over to my brother and myself in 2004. She lived in the property and maintained it herself until her death in December 2015 (she lived in a residential home for the last 2 years and the property was empty). In 2011 she amended her will and stated that it was her "wish" that we should agree and permit Margaret (her daughter, our Mother) during her lifetime to have sole full and free use enjoyment benefit and advantage of the property and the benefit from all rent accruing from the letting of the property provided that she shall maintain and repair the property (bearing in mind this was all done when the property wasn't in her name but ours) Our Mother now wants to rent the property out but will we be liable for the tax as it is in our names? She wants all the income. She has mentioned that she has had advise that we can rent it out to her for peppercorn rent (£10 per month) and then she sub-lets? My brother has had a bad accident and has recently lost his wife and is bringing up 2 children aged 13 & 15 on his own and therefore is in receipt of benefits. Would this be affected by this income? Hope you can help.
Submitted: 6 months ago.
Category: Tax
Customer: replied 6 months ago.
Posted by JustAnswer at customer's request) Hello. I would like to request the following Expert Service(s) from you: Live Phone Call. Let me know if you need more information, or send me the service offer(s) so we can proceed.
Expert:  Sam replied 6 months ago.

Hi

Thanks for your question - I see you requested a live phone call, but this was some time earlier today

I can proceed sending a written response OR would you still like to have a telephone consultation (which will incur an additional fee)

Let me know how you would like to proceed, as |I see you are now offline from the Just Answer site

Thanks

Sam

Customer: replied 6 months ago.
A written response would be great please. Thank you.
Expert:  Sam replied 6 months ago.

Hi

First we have two issues to consider when your grandmother transferred the property to you and your brother on 2004 as

1) Was she is good health when she made this transfer

2) Did your grandmother pay you and your brother rent whilst she continued to benefit from a property that w sno longer legally hers

3) Was this property included in your grandmothers estate when she passed away

The next consideration is how her solicitor viewed her request to allow your mother to make full use of the property when it was no longer legally hers to make any request for - ask as we are not legal experts and whether there was a deed of variation carried out to take the property back into your grandmothers estate - as if not (although I have to be honest and advsie I think its unlikely a gift made before death can then be included in the will to change the legal terms) this is now legally your and your brothers and your mother has no legal right to this property, its rents or anything else to do with the property.

And the rental income it will generate will be treated as yours for tax purposes as the deeds are in you and your brother name, and you cannot let to your mother for a peppercorn rent who then sublets this is tax fraud !

And yes rental income would affect his benefit entitlements - (not child benefit) bu tax credits and any other state benefits that are means tested.

I look forward to responses

Thanks

Sam

Customer: replied 6 months ago.
Thank you for your response and in answer to the questions:-
1. Yes, she was in good health.
2. No, she did not pay any rent but paid all bills and maintenance
3. No, it wasn't included in the estate.
Thank you very much for clarifying that as did not want to carry out a fraudulent transaction unwittingly.
I look forward to your confirmation following receiving the above answers.
Kind regards
Expert:  Sam replied 6 months ago.

HI

Thanks for your response

I should point out that she should have paid you rent - as she continued to benefit from a property that was no longer legally hers - so she should have paid pre owned asset tax OR rent

So this should have been looked at by the solicitor that handled the estate as to whetehre this property should have been treated as a reservation with benefit

This being the case - in law - the property SHOULD have been included in the estate for Inheritance tax purposes, however if the value of this property and all your grandmothers other assets totaled less than £325,000 (and this can be extended if granddad has passed away and had left all his estate to grandmother)

However - this does NOT alter the fact that you deemed to have legally owned this property from 2004 and only you and your brother are legally obliged to manage how you take this forward regardless of what the will said as this is irrelevant from a tax point of view, but again I do urge you and your brother to take legal advsie re the wills wishes and the position in law regarding the property - but I am sure this is disregarded as your grandmother has no control

over a property she no longer legally owned.

But I would also take legal advsie as it may be that matters with your mother are to become a little tricky if you dont have legal backing of the position and what you could or cannot do!

Finally as you and your brother own this you could potentially make an election splitting the difference to be other than 50:50 ownership - however - as benefits are involved I would not recommend this, as as much of a terrible nuisance it will be for your brother with benefit entitlement - take the half share rent that you each then must declare to HMRC and at least then what benefits he gets are with the open declaration of his half share of the rental income - which will be a long term income and guaranteed unlike benefits !

let me know if I can assist furtehr, but if you have all that you need - then it would be appreciated if you could rate me for the level of service I have provided - or click accept

Thanks

Sam

Sam, Accountant
Category: Tax
Satisfied Customers: 13777
Experience: 26 HMRC expertise, PAYE, Self Assessment ,Residency, Rental Income, Capital Gains, CIS ask for Sam Tax
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Customer: replied 6 months ago.
That's all great thank you. Her estate was below the threshold so all ok there. As you say it is a tricky situation and we will be seeking legal advise also but this has been an enormous help. I did receive advise from my own Accountant (exactly like yours) but my Mother was contesting this. I think we will be making the decision to sell the property in the future. Many thanks again and have rated you accordingly :-)
Expert:  Sam replied 6 months ago.

HI

Thanks for the response

That is such a shame she cannot accept the legal position. And I can see why a sale might be on the cards, and then on the plus side the benefits system are NOT so much interested in the lump sum of capital your brother will have but the income that is EARNED Off that capital (such as interest paid) but he just has to be careful not to spend it all - other than on debts or bills or the benefit office could argue deliberate deprivation of capital - but if he declares the receipt of it - and then declares the interest that he may earn from it - all will be reasonably safeguarded.

Though each strain of benefit varies, and sometimes capital in excess of £16,000 negates a claim (such as housing

benefit and help with council tax and Job seekers allowance or employment and support allowance)

Good luck and thanks for the rating!

Thanks

Sam

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