Rental income

Readandcook

Yes I do understand that these properties are not in any trust for the 4 siblings .
Tax has been paid from the relevant accounts.
No one has said that we can’t draw an income but it has never been discussed and not needed until now.
My younger brother lives with my Mum and is quite bitter about the 3 of us having a life basically.
Unfortunately he has terminal cancer too so these quarter shares are just a nightmare for our accountant.
He has been urging things to be tidied up for years but my Mum and my brother seem to almost resent the 3 of us and do not want us to use the money to travel etc.
It’s such a complex situation and I do thank you for your patience.

The accountant seems key, can they recommend some kind of resolution, what do they think 'tidied up' would involve? It may be easier than it's not in a trust (Silverbrook may have advice), l was involved in a family trust administered through a bank, it was a nightmare getting rid of the bank. At least the accountant sounds helpful.

If the arrangement - whatever it is, is tied to your mothers will whoever is administering it is not going to disclose what is happening. In that case your mother is the only person that can explain, if she is willing to do that.

Otherwise you have to wait until she dies and the will is revealed.

Yes I do understand that these properties are not in any trust for the 4 siblings .
Tax has been paid from the relevant accounts.
No one has said that we can’t draw an income but it has never been discussed and not needed until now.
My younger brother lives with my Mum and is quite bitter about the 3 of us having a life basically.
Unfortunately he has terminal cancer too so these quarter shares are just a nightmare for our accountant.
He has been urging things to be tidied up for years but my Mum and my brother seem to almost resent the 3 of us and do not want us to use the money to travel etc.
It’s such a complex situation and I do thank you for your patience.

It certainly does depend on the family and this is a delicate topic of conversation.
My Mum and my unmarried younger brother have control whereas my sister and my brother do not live there.
The family dynamics aren’t that good and my Mum and brother not overly open in discussing with the 3 of us.

David49

It doesn’t cause a “Family Feud” to ask what is happening with this arrangement I’m sure it’s all legal and above board but it is going to be fairly complex.
Find out who the trusetees are and just ask

That rather depends on the family.

You do not appear to be listening to what is being said. Is depends on how the assets are held.

If you are saying that you and your siblings own the assets outright, that they are not held in any kind of trust, who is managing and controlling the money from the rents?

Who is saying you cannot draw on the income? Who has being paying the tax on the rents from the ten properties for all thse years? Do you understand what I am saying about GROB?

It doesn’t cause a “Family Feud” to ask what is happening with this arrangement I’m sure it’s all legal and above board but it is going to be fairly complex.
Find out who the trusetees are and just ask

Thank you for all your replies.
My father died back in 2013 and my Mother is almost 86. I know she pays the taxes correctly.
The bank accounts which the rental is paid into she and my brother have access to.
We have a family accountant and solicitor who I will contact but just wanted to get some advice here first.
My siblings do not receive any income either.
The basic question is ‘ if you own a rental property, even if it is a quarter should you be receiving an income’ ?
Years ago we just let this continue as earning good money myself but now I am 62 I am looking forward to retirement and this money would obviously be very useful.

I agree. It would be pointless going to see any advisor with a simple complaint as expressed here about not receiving the income. It is essential to know how these assets are held, whether trusts are involved and what kind.

It sounds like the parents are still alive.

HMRC assesses Gifts with Reservation Of Benefit based on their market value at the time of the donor's death. If the donor continues to benefit from the gifted property until their death, the property will be included in their estate for inheritance tax purposes, and its market value will be subject to taxation.

These are know as the GROB rules:

Whilst gifting property may sound like an obvious solution to reducing an estate’s value for IHT, where a donor continues to derive any benefit from the gifted property, their estate is not reduced.

Instead, the gift is said to be one with reservation of benefit and the ‘GROB’ rules work to treat the gift as never made for IHT purposes.

When do the GROB rules apply?

The GROB rules are triggered when someone gifts property and one of the following applies:

• The recipient did not take possession of the property and enjoy use of it for a period of either seven years immediately before the death of the donor or the date of the gift; or

• The recipient did not enjoy use of the property to the entire exclusion, or virtually the entire exclusion, of the donor during either the seven years immediately before death or since the date of the gift.

These are rental properties so no possession has been taken or use enjoyed.

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.

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.

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.

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.

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

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?

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.

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.

income

Do your siblings receive their quarter of an name?

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.

Have to say this sounds very strange to me…

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).

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.

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

Which bit is not fair?

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?