Effects of inheritance tax on letting business?

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    Effects of inheritance tax on letting business?

    Hi there,

    Should one pass a home or money to their sibling then there is 7 year period (and a sliding scale) for which the sibling might become liable to inheritance tax.

    (1) Am I correct in assuming that this is exactly the same situation if, for example, a couple of HMO properties are transferred to a sibling?

    (2) Does this change if those same properties were actually owned under a limited company?

    Regards

    #2
    No, the liability would remain with your estate.

    (1) Yes

    (2) It would depend where the debt lay.

    2a. Company contains property worth £1m. Value of PET £1m.
    2b. Company contains property worth £1m, and bank loan of £0.8m secured over property. Value of company and hence PET £0.2m.
    2c. Company contains property worth £1m. Bank loan of 0.8m is a personal loan to individual, secured against (say) main residence, or shares. Company transferred, and sibling takes out loan of 0.8m secured against (say) main residence. Value of PET £1m.

    Comment


      #3
      PET= Potentially Exempt Transfer (i.e. exempt from IHT- Inheritance Tax- if the donor survives seven years).
      JEFFREY SHAW, solicitor [and Topic Expert], Nether Edge Law*
      1. Public advice is believed accurate, but I accept no legal responsibility except to direct-paying private clients.
      2. Telephone advice: see http://www.landlordzone.co.uk/forums/showthread.php?t=34638.
      3. For paid advice about conveyancing/leaseholds/L&T, contact me* and become a private client.
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