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Sam
Sam, Accountant
Category: Tax
Satisfied Customers: 16052
Experience:  26 HMRC expertise, PAYE, Self Assessment ,Residency, Rental Income, Capital Gains, CIS ask for Sam Tax
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I am seeking preliminary advice on potential tax liability

Customer Question

I am seeking preliminary advice on potential tax liability in respect of a property inheritance that was placed in trust for 3 grandchildren. An uncle was apparently given a life interest, but he never took up residence. The property was redeveloped by the uncle and the grandchildren's father, and was subsequently part occupied as a residence by one of the grandchildren and the rest of the property used for many years to run an online book retailing business. HMRC have not apparently been informed of any of this which has gone on for almost 30 years.
JA: For which tax year do you need advice?
Customer: 1993 to date
JA: Anything else you want the Accountant to know before I connect you?
Customer: This is a very high level inquiry as to the possible liability for some form of tax on the use of the property. A long time back a solicitor advised that the trust should be declaring income or something. This is for a friend who is worried.
Submitted: 16 days ago.
Category: Tax
Expert:  Sam replied 16 days ago.

Hi, Sam here , one of the UK tax Experts here on Just Answer, thank you for your question and I shall reply shortly

Expert:  Sam replied 16 days ago.

Hi

Mat I ask what type of trust was this

What connection/legal right the Uncle had with the grandchildren's father to make alterations on the property (as only bequeathed a life interest)

Whether rents were paid to the trust for the use of the book retailing business

Who paid for the redevelopment

what were the terms of the trust for the three grand children and are they planning to retain the property or have it sold and take their share each

I might be able to assist through this mess

Thanks

Sam

Customer: replied 16 days ago.
Sam Hi, the property was bequeathed on the death of the Uncle/Father's mother and as I understand, left for the lifetime benefit of the Uncle and then to be distributed to the 3 grandsons. This was around 1992. The Uncle/Father paid for the redevelopment between say around 1993-4. The property was very dilapidated, but sits in a large plot in a very expensive area north of London. Est value today around £1.5m. One of the grandsons paid for and upgrade to split the property, extend one half and live there for over a decade. Around £70k spent. No rent paid for either the home or the business usage. The grandson left in or around 2015 to return home to his father when his marriage broke up. His ex-wife continued living there for several years. Also her bother lived there whil being employed by the grandson in his business. Messy I know but I need to get a hanlde on it for a friend.
Customer: replied 16 days ago.
The Uncle is still alive. He has never lived there, but for quite a few years used the property to store bric-a-brac until the grandson took up all the floor space.
Expert:  Sam replied 16 days ago.

Hi

What type of trust was this and why is it still i trust if all beneficiaries are over 18 and uncle declined the right to take any element up as life interest ?

Thanks

Sam

Customer: replied 16 days ago.
I have never seen the trust, but I suspect it was a lifetime interest in the deceased's estate. The property would pass to the grandsons only on the death of the uncle. That has not I think happened but when it does I guess a large tax bill might arise?
Expert:  Sam replied 16 days ago.

Hi

Much is dependant on the type of trust - discretionary or bare etc

Yes there will be as the property has been used out of the parameter of the wills request and whilst the Uncle may not have had to pat rent for his usage of the property (be it through not exactly of a residential nature - and the terms of the will would need to be examined whether he should have paid rents for either residential or commercial reasons the grandson should have been and should be (or his ex wife) rents to the trust all the time the uncle is alive and trust returns compiled each year so this income could be distributed back to all grandchildren (or retained depending on the type of trust it is )

Then there is the mess for paying out for development that the trust perhaps could have been responsible for buy unless its only held aspect was this money (and no money) then it could not have paid for any costs

Only a lawyer and preferably the original lawyer or his firm could unpick this mess and rectify outstanding disclosures to HMRC

Thanks

Sam

Customer: replied 16 days ago.
Sam I appreciate your initial thoughts. I have to sign off right now - can we get back in contact on Monday? May be a phone chat?
Expert:  Sam replied 16 days ago.

Hi

if you feel that would be of use then certainly just log back on and hen the pop up appears offering a phone call then just complete the request (note there is an additional charge for this )

Thanks

Sam