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Clare, Solicitor
Category: Law
Satisfied Customers: 34889
Experience:  I have been a solicitor in High Street Practice since 1985 with a wide general experience.
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My ex father in law paid off the mortgage for myself & ex

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My ex father in law paid off the mortgage for myself & ex wife back in 2009.
written loan agreement was signed by all parties, and regular monthly payments were made to a bank account in my wife's name so he could avoid tax. The loan incurred interest at 5.29% which was verbally agreed would come back to my ex wife at a later date.
we are now divorced and there was a period of time ( 15 months ) where no payment was made, which he agreed was for the best during the financial settlement. for 15 months he did not chase or mention the outstanding amount as it was agreed the oustanding capital would be paid once the family home was sold. He has been paid in full the capital owed. He is seeking from me 15 months worth of interest payments.
- Do I have to pay this interest ?
- As he did not declare this income to the tax man does this make it a gift instead of a loan?

Thank you for your question

My name is Clare

I shall do my best to help you but I need some further information first

How much was the loan and how was it dealt with within the financial side of the divorce

Customer: replied 1 year ago.
The initial agreement was for £90,578 payable over 22 years @ 5.29% interest.
The capital outstanding was £75,106 as of june this year and was paid in full. We had a court hearing & the Financial settlement from my divorce stated this was what was owed to my Ex father in-law which he at the time agreed, last november.
He has been paid in full July this year.regardsDaniel

Was that agreement referred to in the Court Order at all?

Customer: replied 1 year ago.
Hi Clare
The Court Order just stated the total amount owed to him,
4. “The loan” shall mean the parties’ debt owed to Mr Geoffrey Beech in the sum of £75,106.
This was the figure given by him, and has been paid in full. Currently I'm going to court in October with the following defence.
• Mr Beech agreed its probably best to postpone payments in Feb 2015 until a resolve was found, therefore modifying the contract
• Did not mention in 15 months regarding interest owed,
• Final figure given to the courts during the financial settlement case to pay has been paid in full and did not include any arrears of interest. This was not questioned at all by Mr Beech
• Loan agreement has been settled in full early & Mr Beech’s formula completed
• No terms & conditions were set out regarding missed payments
• Mr Beech agreed to defer payment of capital and interest in Feb 2015
• If a lender receives any interest on a loan, then they must inform HM Revenue & Customs, as this amount may be liable for taxation as income. Mr Beech has not notified HMRC therefore the loan must have been a gift as I was told that the interest would be return to my Ex wife at a later dateRegardsDaniel

Sorry - does the Order refer to the loan being paid off at all?

Customer: replied 1 year ago.
Hi Clare
the financial remedy order does say that the outstanding debt is to be paid from the proceeds of the family home sale.
The figure quoted is as mentioned above, which does NOT include interest. My ex wife & ex father in-law approved this order and figure quoted.

That is excellent news.

have you actually filed your defence?

Customer: replied 1 year ago.
I have completed the initial defence form on line after receiving the claim form from the courts.
I have accepted mediation, but not heard anything yet although I know he will not accept any thing less than full payment.
I have a court date set on 26th October and have to send in my documents by 23rd October.
Is this the best way to defend this case quoting the court order?
Does the fact that he has not declared interest over the last 6 years to HMRC make this a gift and not a loan despite a written agreement? All payments for this loan was paid to an account in my ex wife's name and her mum, both non tax payers.

You have filed a defence - but in fact you now need to concentrate this on the fact that your former father in law provided a figure he would accept in full and final settlement.

You shoudl also write to your ex (and copy her father) that you will be asking the court to join her into the action since this was a joint debt

The Tax issue is irrelevant to you - and no you do not have to pay - he accepted a sum in full and final settlement and he cannot take the matter any further

Please ask if you need further details

Customer: replied 1 year ago.
ok thats great news, thank you so much for looking into this for me.
I believe he is only seeking 50% of the so called debt from myself. Will the Court order document be enough evidence?

It was a joint and several debt - and yes you were entitled to act on the basis that this debt had been settled in full

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