Rental income

I assume you have paid any capital gains tax arising on the assets transferred to children.

Transferring assets to children while retaining the right to continue receiving the income, known as a "gift with reservation of benefit," has tax implications. While it may seem like a way to reduce inheritance tax (hence your mention of seven years), it can also cause the property to remain part of the donor's estate and be fully taxed upon their death.

Whether you draw on the rental income is irrevelant. If you could draw on it then it’s taxable.

You need to see a tax accountant.

Sorry when I mention children I am meaning myself and my 3 siblings.
I do not wish to create a family feud but I do not see it as fair.

You do need to clarify this situation you have been told it’s been transferred to you, that may or may not have happened, the tax rules around rental properties is complex.

Most likely some kind of trust is involved.

Readandcook

Sorry when I mention children I am meaning myself and my 3 siblings.
I do not wish to create a family feud but I do not see it as fair.

Silverbrooks gives sound advice.

What is it that you don't see as fair?

Are you saying that your parents have held on to the rental income?

David is correct that there is probably some kind of trust. As Silverbrooks wrote, you really need to see a tax accountant to clarify the situation.

My own children have rental property which was gifted to them by their grandmother when they were 18. All taxes were paid at the time and tax continues to be paid on the rental income, but the residual income goes to my children and they own the properties outright.

I'm still unclear although it sounds the same as what I said before only one generation back.

Your parents have transferred the properties into the names of their four children (including you) but have retained the right to the income. Is that it?

If so, as I said above, there are CGT implications (on the transfer of the assets) and IHT implications if these were "gifts with reservation of benefit".

If your parents have retained the right to the income, I hope they have been declaring it else they could be in serious trouble with HMRC over tax evasion.

I'm not understanding.

Perhaps the asset was properly transfered to your names but the income was reserved, with your parents continuing to receive the income?

We've given rental homes to our children and grandchildren. They now receive the income as they own the properties.

Maybe ask your parents who earns the income and pays the taxes.

That the rental income generated on these properties goes into various accounts.
As I mentioned I do not receive the money- it is held in bank accounts and the rentals go back 20 years plus so there is a fair bit in these accounts.

Readandcook

That the rental income generated on these properties goes into various accounts.
As I mentioned I do not receive the money- it is held in bank accounts and the rentals go back 20 years plus so there is a fair bit in these accounts.

From what you say your parents receive the income, presumably paying the taxes and hold the income in various bank accounts. What are you asking - what is not fair?

I do not wish to create a family feud but I do not see it as fair.

Which bit is not fair?

That the properties are in the 4 children’s names but we do not receive any income from them.
The money is sat in various bank accounts.

You need to see a solicitor or an acountant who knows about these things, and tell them everything you know, including which rental properties have been transferred to you and your siblings by your parents. Maybe Citizen's Advice can help you (free).

Have to say this sounds very strange to me…

Readandcook

That the properties are in the 4 children’s names but we do not receive any income from them.
The money is sat in various bank accounts.

Perhaps ask your parents. Maybe they have reserved the income to themselves, wanting the money in various bank accounts.

Do your siblings receive their quarter of an name?

income

I am puzzled OP, you say you own rental properties on long term lets but receive no income…….sounds suspicious to me……rather like tax evasion I would say.

There is a simple answer. Consult an accountant and possibly a solicitor and find out exactly what is happening.

None of us can possibly advise on such a complex and clearly legal/financial problem.

Readandcook

That the properties are in the 4 children’s names but we do not receive any income from them.
The money is sat in various bank accounts.

You need to explain more rather than keep repeating that the money is sitting in various accounts. Whose accounts are these? Who has control of them?

As I have explained, twice, after you clarified who you meant by children, if it is your parents who are receiving the rental income then the property transfers sounds like "gifts with reservation of benefit".

Who has been paying the income tax on these rents for the last twenty years?

Maybe you know Silverbrooks. Should CGT have been paid when the ownership was transferred? And was it?

I vaguely remember something about "gifts with reservation of benefit" remaining in the donor's estate until they die (can't remember the details).

OP urgently needs to seek legal advice about the exact nature of the transfer.

A few questions/comments though I am no expert.

I also don't understand what the OP means by "various accounts".

Who opened these accounts and is currently receiving the income?

Even if the rental properties are in the names of the OP and her siblings it sounds like they are not "beneficial owners" even if their names are shown as owners of these properties at the Land Registry.

I agree that this sounds like a gift with reservation which could mean the value of these rental properties will still be included in the estates of those who gave the gifts and therefore no inheritance tax is avoided even if more than 7 years have passed since the gifts were made.

It's likely that the OP's parents should really get the advice of a tax accountant.

growstuff

"gifts with reservation of benefit" remaining in the donor's estate until they die

That's correct, as I explained upthread.

Should CGT have been paid when the ownership was transferred

Yes.

Readandcook

I am a retired tax accountant with decades of experience but I can only comment based on the scant information you have provided.

That you say the properties were transferred into the names of you and your siblings suggests ownership but how are ten properties divided by four? Do you each have a quarter share in each of the ten properties?

They could be held in a discretionary trust but, if so, who are the trustees? Who has the discretion to pay the income and why aren’t they paying it to you? Income from assets held in discretionary trusts is taxed at 45% whether the income is paid to the trust’s beneficiaries of not. Trustees may have the power to accumulate income but income tax still has to be paid on it. It’s no different to receiving interest on bank savings but chosing to leave the interest in the account. The income is still taxable in the years it arises.

There are interest in possession where the trustee must pass on all trust income to the beneficiary as it arises (less any expenses).

If the assets are held in bare trusts then the beneficiaries have an immediate and absolute title to both capital and income and are taxed at their own marginal rate as if they owned the assets themselves. These are morecommon in the case of minors to hold assets until they are 18.

There is no point in the OP speaking to Citizens Advice or a solicitor or a tax accountant without documentary evidence of the precise status of the property ownerships, trusts, various accounts etc. Start by asking your parents, if still alive, or their executors for information and documentation.