Bare property trust

14 January 2009

Issue: 4189 / Categories: Forum & Feedback , Property , Income Tax

Parents purchase a property with a mortgage and hold this on trust for minor children. Any profit is likely to be taxed as if it is their income, but if a loss arises, can this be set against their personal income from other properties?

What is the position where parents buy an investment property partly financed by a mortgage for their minor children using a bare trust and there is a rental loss after interest paid?

If there was a surplus this would be taxed on the parents while the children are minors but if the result is a loss can the parents claim this loss against the income arising from their own personal property portfolios? I am also wondering whether the new interpretation on chargeable events from 2007-08 changes this at all?

Readers’ advice is welcomed.

Query 17 332 – Almost There.

Reply by Lacuna

The ‘parental settlement’ provisions are now contained in ITTOIA 2005 Part 5 Ch 5. Prior to 9 March 1999 bare trusts for minor unmarried children of the settlor could be tax-efficient provided any income arising was not paid to or for...

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