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Bomad Tax Risks

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Something occured to me last night which I don't think has come up here yet, which is the huge ticking time bomb of the bank of Mum and Dad. I'm sure someone can clarify the rules exactly, but my rough grasp of the rules suggests thus:

Consider if BoMaD close (death!):

=> Gifted Deposits may attract IHT if made within 7 years of closing.

=> Loaned Deposits will need to be repaid immediately if BoMaD closes.

Consider if BoMaD needs a state bailout: (state funded long term care)

=> Gifted Deposits within 7 years of needing state aid would be treated as disposing of assets and would have to be repaid before state aid was offered.

=> Loaned Deposits would be treated as an asset and have to be repaid before BoMaD could get state aid.

Consider if insufficient paperwork (tax forms) completed:

=> Gifted deposits attract Capital Gains Tax

=> Loaned deposits may lead to tax investigation

Consider if BoMaD obtained a loan against their property to provide financing but default on their payments:

=> Gifted deposits could be considered disposing of assets or deliberate fraud.

=> Loaned despoits could be treated asassets by creditors and return demanded.

Anyone out their have any insight on this? Ignoring potential family arguments, it looks like a legal can of worms to me!

Edited by TaxAbuserOfTheWeek

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If your analysis is right, this could end up being another endowment mortgage-scale time bomb.

However, if the Tories get in they may tell HMRC to turn a blind eye, as cracking down on BOMAD would effectively be cracking down on their core voters.

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But if Mum and Dad pay deposits from cash savings; remain solvent and live seven years - there's no problem.

And I would imagine this to be the scenario in the majority of cases.

The remainder may well prove very problematic.

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