If a partnership of three people, Two parents and one son buy a property for storage for say £250,000 and pay for it through the business, a garage, is it then legit to gift said property to the two daughters (not partners) and the son (partner) then them charge the business rent at the rate of £12,000 per year?
Does the partnership own the property? I assume it was bought outright? I would think it is ok for the partners to gift the property and it would form a potentially exempt transfer (PET) and so if the donors live for seven years then it would fall outside of inheritance tax.....it's been a long time since I've looked at this kind of thing though so I wouldn't want to advise without seeking specialist help but my gut feeling is that it is ok.....maybe!
Yes the partnership owned the building outright, it was paid for through the business from the profits.
In fairness, as he explained it to me he admitted that the gifting would be classed as evasion, however if they charged rent on a regular basis, which in this case is bi-yearly then that would legitimize things, I do however take what he says on financial affairs with a pinch of salt :).
One of my chief concerns is if one of the recipients of the gift is a partner, is this not then a drawing as the business is just handing him money, this can then be dealt with through his own personal tax return.
I just don't want to be doing anything that might come back and bite me if they ever got investigated and the partners claimed no knowledge of what I had done. It may be a case of all of it going to a specific account in the balance sheet with the rest of 'funded by' elements and a note to the accountant for him to deal with it. It just smells a funny colour to me.
