A: You have not said whether the practice receives notional rent or borrowing costs reimbursement.
Paragraph 39 of the Premises Cost Directions 2004 states that reimbursements for borrowing costs (old cost rent scheme) will continue until one of three events:
- The loan is paid off.
- Alternative borrowing arrangements are entered into and the GP negotiates lower loan costs, in which case a new rate is calculated.
- The GP transfers to notional rent.
If you pay your parents interest on the loan, the rate is likely to be less than the original rate on the retiring GP’s loan and the PCT could reduce the rent as borrowing costs have reduced.
If the practice is receiving notional rent, this will not change, because it is based on the market rent of the property.
You would be able to claim tax relief on any interest you pay your parents. However, they will need to declare the interest received and pay tax on this income. A solicitor can draw up a loan agreement for you.