Spend or give away and pay tax.

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malcolmfowler
malcolmfowler Posts: 50 Forumite
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in Cutting tax
This may be a stupid question but here goes.

If I gave my children a £50k gift each and died the following year it could be considered for inheritance tax. Right?

Instead, if I bought a 1st class round the world trip with all the trimmings for £100k, HMRC wouldn't try and tax the Airline and all those hotels I stayed in. Right?

Is this correct?

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  • anselld
    anselld Posts: 8,282 Forumite
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    This is correct. What is your point?

    If you want an immediate IHT liability reduction you could look into a Discounted Gift Trust... or just book the trip.
  • malcolmfowler
    malcolmfowler Posts: 50 Forumite
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    No point really, just sitting here with a glass of wine thinking about how we can pass on some money to the kids without tax liability.

    What if my children invoiced me for a stupidly expensive car wash? No different from a stupidly expensive hotel room in Dubai.
  • Keep_pedalling
    Keep_pedalling Posts: 16,633 Forumite
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    malcolmfowler wrote: »
    No point really, just sitting here with a glass of wine thinking about how we can pass on some money to the kids without tax liability.

    What if my children invoiced me for a stupidly expensive car wash? No different from a stupidly expensive hotel room in Dubai.

    If you are in good health then simply make the gift and take out a term insurance that will cover any IHT due on the gift should you die within 7 years. We have a second death policy which will pay out over £200k for £19 a month, which is more than enough to cover gifts made in recent years.

    We also like to splash out on our selves, so you can do both.
  • Dazed_and_confused
    Dazed_and_confused Posts: 6,458 Forumite
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    Well the hotel company will presumably be paying whatever tax is due in Dubai, would your kids be registering their car wash business and paying UK taxes on the stupidly large profit they'd have made from your custom??
  • boliston
    boliston Posts: 3,012 Forumite
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    malcolmfowler wrote: »
    No point really, just sitting here with a glass of wine thinking about how we can pass on some money to the kids without tax liability.

    What if my children invoiced me for a stupidly expensive car wash? No different from a stupidly expensive hotel room in Dubai.

    Just gift the money and stay really healthy (gym, healthy food, avoid excess alcohol etc) and hope you live for another 7 years.
  • macman
    macman Posts: 53,098 Forumite
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    If you've got £100K handy to give away now, then you are presumably in the income bracket where you can afford to pay for some professional estate planning advice?
    If you have surplus income then you can make regular gifts to family, as long as your capital is not diminished. The 7 year rule would not apply.
    No free lunch, and no free laptop ;)
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