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bigduckontax
bigduckontax, Accountant
Category: Tax
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My parents have set up an irrevocable trust in the Isle of

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My parents have set up an irrevocable trust in the Isle of Man where they are resident. The Trust is prepared to lend me a GBP150,000 mortgage on my house. To avoid this being considered income, what interest rate is required? Are capital repayments necessary? Is a formal loan document required?
Thanks.
Submitted: 1 month ago.
Category: Tax
Expert:  bigduckontax replied 1 month ago.

Hello, I am Keith, one of the experts on Just Answer, and pleased to be able to help you with your question.

Granting a mortgage is not a taxable event so the interest rate, if any, is irrelevant. A formal loan document would be a good idea to protect both you and the trust.

I do hope that I have been able to set your mind at rest on this matter.

Customer: replied 1 month ago.
Keith,
Thank you. I appreciate that a standard mortgage is not taxable but I am concerned to avoid any ambiguity given the potentially incestuous nature of this transaction. Thus if the interest rate were too low and/or there is no capital repayment, could HMRC consider the loan a gift? I presume a solicitor could frame a formal agreement.
Philip
Expert:  bigduckontax replied 1 month ago.

If it is a gift then that does not concern you, Philip. The UK has no Gifts Tax regime; just thank your lucky stars you don't live in France where gifts tax kicks in at 5K Euros!.

Yes, it would be adviseable for a solicitor to draw up the loan agreement.

Please be so kind as to rate me before you leave the Just Answer site.

Customer: replied 1 month ago.
Keith
Thanks you again. Just to confirm, does this mean that the Trust could give the GBP150,000 to me outright without any tax liability? This is contrary to previous advice we had received.
Philip
Expert:  bigduckontax replied 1 month ago.

Yes, Philip. it could. As I told you the UK has no Gift Tax regime. Neither does the isle of Man either.

I don't know who gave you that advice, but it does not appear to be correct.

Please don't forget my rating.

bigduckontax and other Tax Specialists are ready to help you
Customer: replied 1 month ago.
Keith,
This is a great relief. It is possible we got confused with the US where the IRS considers any gift over $13,000 as income.
Thanks again, I will be happy to rate your help highly.
Philip
Expert:  bigduckontax replied 1 month ago.

Delighted to have been of assistance, Philip. Actually the US limit is $14K not 13K!

Thsnk you for your support.