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Posted Sun, 06 Nov 2022 21:57:47 GMT by hpiper Piper
Hi, I have loaned someone money with the only expectation being that the money is returned. There is no interest at any percentage point requested. All that is agreed is that the money is lent to them and not a gift and that it eventually gets returned. This is clearly not income. The issue arises if that person, irrespective of the loan, gifts me money after having repaid the loan, for example from a parent. For E.g. 100GBP is loaned and repaid. Months later, parents gift their child 500GBP to support living costs with no expectation of the money returned and was not agreed to be given on condition of the 100GBP loan. The loan and gift are separate. The numbers above are arbitrary and only there to give context to the question. From my understanding, the loan itself is not taxable income. Gifts are subject to IHT if the person dies within 7 years of the gift, however, it seems to me this could not be classified as income from interest on the loan as it was not dependent on the money being loaned out. The loan could have been repaid, with the gift never being given and there would be no problems as it was not a condition of the loan and was completely separate. If they are as I believe separate, how do I clarify this to HMRC? Thank you for your help, it is very much appreciated.
Posted Thu, 10 Nov 2022 11:39:04 GMT by HMRC Admin 19

You would specify the circumstances and identificatin of the payments so that HMRC are aware of it being a loan or a gift. This should be done in writing and sent to:

PAYE & Self Assessment

Thank you.

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