Can a wealthy parent pay for son's holiday?

bobbyj_2

Not mine as fortunate not to need 'handouts' from parent :-)
Just a neighbour - a worrier at that thinks this would be a 'gift' and has got himself into a muddle along with parents. He has a brother in Oz who he visits twice a year and has been doing for quite a number of years. He also has taken a few trips to exotic locations as well and had a new car off them twice. He reckons this has taken him over £3 k a year iht free gift allowance. Both parents are retired and live comfortably so not as though they can't treat him. He says he's been having sleepless nights as somebody in the pub says his parents shouldn't be doing this and they may be investigated. This aint a wind up btw! I've told him to calm down and stop worrying they have done nothing wrong. I think they give him some sort of allowance as well as he only works part time yet rents the house which must be £900 a month. I've told him to keep records of any payments in case of IHT in the future, about right i suspect?

antrobus

bobbyj wrote: »

He says he's been having sleepless nights as somebody in the pub says his parents shouldn't be doing this and they may be investigated. This aint a wind up btw!

The 'somebody in the pub' is a complete !!!!in idiot and can safely be ignored. Parents, rich or otherwise, are perfectly entitled to give their children anything they want without informing HMRC or any other authority. The worst that would happen is that, if the parents were to die, then some executor might well tot up the value of these gifts and add them to the estate for the purposes of calculating the inheritance tax due.

lisyloo

Inheritance tax may be due if they die within 7 years of the gift.
I believe there is a sliding scale, so if they dies after 6 years it would only be a small proportion.
This is to stop people avoiding IHT and giving away everything on their death bed.

The only precaution I would take is to keep records, which could be gradually disposed off after 7 years (sounds like a rolling 7 years).
No-one is expected to keep records, but it would avoid overcharging or making an honest mistake, so is a sensible pre-caution.

However other than that, there is nothing wrong.

bobbyj_2

yes thanks I've just shown him this thread!

duchy

And what does "font of all knowledge" at the pub do for a living ? Not a tax specialist-that's for sure
Every pub has one of these-a know nothing who purports to know everything

Incidently my Mum bought me a house -and died suddenly two months later-and there was no tax issue. It was something we investigated very carefully before buying with proper legal advice.

John_Pierpoint

There is also an "allowance out of income" that allows wealthy parents to spend their INCOME (not capital) as they see fit as long as such expenditure does not materially effect their way of life (ie force them to live on capital).

With inflation at 4 - 5 % in real terms this could be difficult, but HMRC accounts in a devaluing fiat currency.

You don't give the ages of the people involved, or anything about their personal character and abilities, so I cannot really make judgements about the wisdom of the parents "subbing" one of their sons.

CLAPTON

lisyloo wrote: »

Inheritance tax may be due if they die within 7 years of the gift.
I believe there is a sliding scale, so if they dies after 6 years it would only be a small proportion.
This is to stop people avoiding IHT and giving away everything on their death bed.

The only precaution I would take is to keep records, which could be gradually disposed off after 7 years (sounds like a rolling 7 years).
No-one is expected to keep records, but it would avoid overcharging or making an honest mistake, so is a sensible pre-caution.

However other than that, there is nothing wrong.

the 'sliding scale' only applies to gifts in excess of the IHT limit i.e. over 325,000 at the current time


also worth noting that if the parents give gifts on a regular basis out of their income (and not their capital) then it is outside IHT even if they do die within 7 years... in these circumstance it is worth maybe keeping records but otherwise there is no requirement to do so.

bobbyj_2

duchy I've asked a similar question re buying a house as regards sis in law and her mum. A "deprivation of capital issue" seems to be many peoples concerns. Basically they want to buy a property together and I've said maybe the mother should just gift the daughter money instead of them going halves, (the mother is wealthy).

Barneysmom

You can generally rest assured with things like this.
Ministers don't vote for anything that may be detrimental to their own lives