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Inheritance Tax

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Can anybody answer this question on inheritance tax please? My elderly father can no longer stay in his own home, and I have offered to care for him. However, because he is disabled, he needs to spen… Read More
melanie789 Avatar
7y, 9m agoPosted 7 years, 9 months ago
Can anybody answer this question on inheritance tax please?
My elderly father can no longer stay in his own home, and I have offered to care for him. However, because he is disabled, he needs to spend a significant amount of money converting my home to make it practical for him to live here. This will involve installation of a disabled en-suite, a walk in shower room, conversion of most of the exisiting rooms to give us all space, disabled grab rails etc. Although this work is likely to cost in the region of £50k, it will add very little overall value to the property. My question is, would the money being spent on this work be exempt from inheritance tax? I know that gifts over £3k have to be declared, but I would hardly call this a gift as we are not going to benefit from it. My arguement is that if he were able to stay in his own home by spending £50k on renovations, HM Revenue would only take the market value of the property into account, regardless of how much has been spent on it. It would seem spectacularly unfair to penalise families who take on this type of responsibility by categorising it as a gift for inheritance tax purposes, when actually it is nothing of the sort.
melanie789 Avatar
7y, 9m agoPosted 7 years, 9 months ago
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#1
inheritance tax threshold is 312k so unless he has that kinda money he cant be avoiding tax by paying 50k now. if his total assets are less than 312 thousand then inheritance tax is not an issue.
#2
Hi Barky,
I think his total assets with the sale of his house are over the threshold. That's what's worrying him, and us. I wouldn't think of discussing care homes, but I really don't see why a family should be penalised for carrying out essential work that does not benefit them, only the person spending the money. The term "Gift" isn't exactly well explained by HM Revenue, so I'm half inclined to go ahead with the work and say to hell with them. If they want to take the matter further in the future, I can argue my case for not including the money spent as and when.
#3
I would get real advice on this Melanie - not forum guesses
#4
melanie789
Hi Barky,
I think his total assets with the sale of his house are over the threshold. That's what's worrying him, and us. I wouldn't think of discussing care homes, but I really don't see why a family should be penalised for carrying out essential work that does not benefit them, only the person spending the money. The term "Gift" isn't exactly well explained by HM Revenue, so I'm half inclined to go ahead with the work and say to hell with them. If they want to take the matter further in the future, I can argue my case for not including the money spent as and when.


remember the "threshold" means that the first 312k is free of tax-you would only pay inheritance tax on any amount OVER that. So if he gifts you 50k now then it all depends what his total assets would be in the future when he passes on. Obviously money needs to be spent on his day to day care which may reduce the money below the tax point . so say he spends 50k now and then hopefully lives for many more years,at the point of his passing he would need to leave an estate of value 262k then you take into account the 50k for home improvements which takes you to the tax threshold. I hope I have explained that ok and you get my point.
#5
Hi Damnome,
Yes, you are right. It just makes me mad that you have to worry about issues like this, when all you are doing is trying to care for an elderly parent. After all, if families weren't prepared to do this, the responsibility would be on the state to provide many services that I will provide for nothing.
#6
Hi Barky,
Thanks. I take issue with the HMRC term "gift". He isn't gifting me anything except months living on a building site, and in the end a house probably worth no more than before we started the work. In fact it could possibly be more difficult to sell because it has been specially adapted for a disabled person. So, if theres no material gain, how can there be any benefit? Like I said, if he spent this money on his own home and it did not increase it's overall value, it wouldn't be taken into account for inheritance tax. So, why should different rules apply just because he needs to be cared for by me?
#7
Shouldnt you be thinking of the welfare of your dad rather than what you gain, surely his quality of life is more important than inheritance. Sorry but I lost my dad 2 yrs ago and I would pay anything to have him back. Its to late for regrets when your parents are gone, I would give him the best care while you can.
#8
Hi alfie73,
Very sorry to hear you lost your Dad.
Yes of course my Dad's welfare comes first. It's just wrong that ordinary people who have worked hard all their lives and paid taxes have to worry about paying things like this. We aren't talking about a wealthy man, just a middle/working class widower who owns his own home, that now happens to be worth around £300k. It's just an ordinary 3 bed semi in Kent for Christs sake!! I'm not bothered about the money, but my Dad is determined to stop this bloody government getting any part of it. I don't blame him, so would I!!
#9
melanie789
Hi alfie73,
Very sorry to hear you lost your Dad.
Yes of course my Dad's welfare comes first. It's just wrong that ordinary people who have worked hard all their lives and paid taxes have to worry about paying things like this. We aren't talking about a wealthy man, just a middle/working class widower who owns his own home, that now happens to be worth around £300k. It's just an ordinary 3 bed semi in Kent for Christs sake!! I'm not bothered about the money, but my Dad is determined to stop this bloody government getting any part of it. I don't blame him, so would I!!


I fully understand the situation you are in, I didnt mean it nastily. I just meant that time goes by so quickly and you cant turn it back. Unfort the gov is take take take. I hope all goes well for you. :)

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