Tax rules around gifting or selling assets can be complex, and in some cases, you may still be liable for tax even after transferring ownership.
Pre-Owned Asset Tax (POAT) is one such charge that can apply when someone gives away an asset but continues to benefit from it in some way.
This article explores what POAT is, when it applies, how it is calculated and what steps you can take to manage or avoid it. Understanding these rules is crucial to ensuring compliance with HMRC regulations and avoiding unexpected tax liabilities.
How much is the POAT charge?
The POAT calculation is complicated and is based upon the benefit or potential benefit enjoyed by you as a result of staying in the property. In simple terms, you are treated as having received the market rent for the property, and the equivalent of income tax would be charged annually.
How do I pay the annual charge?
This would be done on a self-assessment tax return. This is an annual charge and will need to be paid each year – much like income tax. We have in-house accountants who would be able to assist with preparing this return.
What can be done to avoid the annual charge?
You can make an election for POAT not to apply and instead continue to treat the cash as forming part of your estate for IHT. This means that the value of the cash given to the family member would be included within your estate on death and this would be accumulated with the remainder of your assets.
This POAT charge does not apply if the property remains within your estate for IHT, as this would instead classed as a gift with reservation of benefit.
When should the election be made?
You must make the election by 31 January following the end of the tax year in which you first become liable for POAT.
Making an election for POAT
You make the election by completing an IHT500 form and submitting this to HMRC. We can assist in completing and submitting this form on your behalf.
Need Advice on POAT? Contact Us Today
Should you think that this charge may be relevant to you, then please get in contact with us on 01279 755 777 or fill in our online enquiry form to seek further advice and assistance with any forms which might be required.