Inheritance Tax: Laugh at Suspicion
I’m thinking of buy my parents’ house. It’s worth £650,000 but even with a mortgage I could only pony up £450,000. They would move to another property. My know-it-all sister is not averse to the sale, but she says the sale must be at the full market value. Surely, my parents can sell their property to whomever they wish at whatever price they agree. Who’s right?
In the long ago, in the ancient times, in the days when only farmers drove Range Rovers, I trod a path of scholarship in pursuit of a master’s degree – thus, I earned the right to put the letters MBA after my name. My next-door neighbour, a delightful lady of no small charm, had come to these shores in her quest of a doctorate in pedagogy.
She had a three, perhaps four-year old son, who’d just started at nursery.
Children of All Ages
In an unpractised, and in my minor dread—hopeless attempt at being friendly, seriously, how does a young adult who had no concept of, hadn’t the merest shadow of inclination or desire for fatherhood talk to a toddler without sounding clumsy and condescending or worse like an irredeemable idiot? But, I had a go at it. I muttered to the young fellow, enquiring after his welfare, and how he was finding his initiation to our education system. He relayed his untempered enjoyment of the experience.
He or I, I forget who, alighted on the fact that he had been learning nursery rhymes. We then sang several of them, Polly Put the Kettle On, Ring a Ring of Roses, Baa Baa Black Sheep, on and on we went.
Ancient Delights Reborn
The lad’s mama marvelled at my recall with such scant prompting such songs from so far back.
Our conversation then strayed on to the fact of her own study, that she’d recently busied herself with English idioms and proverbs, she displayed a mastery of English idioms as she intimated several English sayings had an approximation in her native Persian.
She professed slight discombobulation at the divorce of dictums from their original context as to adduce an exemplar: rose by any other name would still smell as sweet is employed as an illustration of a different concept from the meaning it was originally employed.
In concurrence, I expressed frustration at the popularity of the expression actions speak louder than words.
Where’s the merit of speaking loudly or worse, shouting?
What’s the profit to be had in speaking loudly?
I much prefer rendering the proverb as actions speak clearer than words.
No One Likes a Smartarse Nonetheless, both you and your sister are right. Both you and your sister are right… to a point.
A buyer and a seller, ordinarily, can agree a price, that, after is the central tenet of markets – but to most purposes, if a sale price strays from the open market value, eyebrows are raised, backbones are stiffened, and, whisper it gently, suspicions are excited.
People, in envy, in malice or in caution would ascribe criminal motives to the transaction – who could blame them, for often, sales that stray from the open market value scream ‘money laundering’.
I trust like me, you style all your doings so that like Caesar’s wife, you’re be able to laugh at suspicion in the face.
Back to my neighbour’s study of language and words. Let’s take a rose by any other name, from the mouth of Juliet Capulet, and dress them in the clothes of our circumstances: a gift is a gift is a gift. If you brought the house at a £200,000 discount, your parents would be giving you a gift of £200,000. This gift could carry several consequences.
The first would be capital gains tax of which the liability would be nil – there would be no capital gains tax on the sale element of the transaction as it appears your parents would be selling their principal private residence. There would be further, no stamp duty payable on the gift element as nothing is given in exchange for the gift, although stamp duty would be due at the prevailing rate on the sale element of the transaction.
The main tax of which you should be wary is inheritance tax – depending on the extent of your parents estate, depending on the disposition of the rest of your parents estate, depending on the date of the parent that gave you the gift, you might be liable to tax of up to £50,000 on the gift.
Ade Oduyemi, MBA