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PET problems
We act for a lot of elderly people who are focusing on inheritance tax. Several of them with relatively valuable main residences (conservatively £1m going up to £3m) have discussed with us making a potentially exempt transfer (PET) of the house to their children and then paying a market rent.
We explained to them that this could create an annual income tax liability where there was none before that a proper valuation to arrive at an arm’s length rent is needed and that there should be a formal lease.
In addition to the above there is also the issue of repairs because some of these big houses have a heavy annual liability.
Our understanding is that most landlords have to meet that but in some of these cases the donees might find it difficult having doubtless used the rent to...
