MrMuffin

We're trying to buy a house right now. My wife's family have offered us a family friendly loan. plus a gift of a downpayment.

Can anyone help me in terms of tax issues?

If they gift us £100,000 and loan us £100,000 what tax implications will we suffer in the US or the UK?

The loan is at near-zero interest. They want to be paid back with payments based on a 25 year schedule, but they want us to pay them off in total by the 10-year point. So we're thinking that we will get a small UK mortgage for now here, use the gift as a downpayment then use the loan to fund the rest of the house.

Then in 10 years we'll re-do the mortgage and mortgage the remaining balance from the USA loan with a UK mortgage.

Can anyone help with my tax questions:

1. Is the gift taxable? US or UK?
2. Is the loan amount taxable? US or UK?

Argh!

Thanks so much!
MrM

cyrian

Hello
In the UK, gifts of money up to £325k per individual are "potentially exempt transfers" which fall out of the tax system after 7 years. Therefore a couple can gift £650k.
Gifts greater than £325k are taxable transfers where the tax liability is borne by the donor.
I think that if the gift is made in the US then it is entirely a US matter and you are simply transferring your money to the UK with no UK tax implications.
If your deposit gift is under £325k then basically the UK is not interested.
Loans are not taxable and do not need to be declared to the UK.
I have discussed cash gifts with a US friend and I know that there is a limit each year as far as US tax is concerned. You would have to Google what the current limits are.
I have no idea what US rules are on loans but you could Google that also.
If you have a formal written agreement for the loan with specified interest then I would have thought that the interest payments would be declared on the US tax return.
Capital isn't taxed in the UK but income (interest) is.

MrMuffin

Thank you Cyrian for your information. I will dig further. Thanks again.