How does the tax man know?

whatatwit

henryhallsdanceband wrote:

On this same theme. As I have posted elsewhere today my wife is paid directly by a consultant for private nursing work she does for him. Now he is not going to have to tell the taxman WHERE, HOW or on WHAT he spends his income - so how would the taxman ever find out my wife was getting paid for private work. Unless of course as part of HIS return he declares payments made to my wife as business expenses.

Only interested.

I think you have the nail on the head, if he claims the payments as business expenses.
If your wife privately nursed a lady down the street and was paid direct by her, then as you say, who would know.
But, you are back to the fact that it is evasion if the income is not declared.

RayWolfe

And he will claim it as a business expense. Why wouldn't he? You must declare this income.

brokenomore_3

This is probably an appropriate thread to tag my post on to.

We were planning either way to move my mother in with us in a couple of months.

She has now decided to sign her house over to my sister as a gift (value aprox £100k) and give myself and my wife a gift of £50k between us. (I am a tax payer, my wife isn't.)
Including the above (house/gift/remaining estate), her total estate is probably worth around £200k.

My questions are:

1. Do I have to pay tax on the £50k unconditional gift to us? (due in a couple of months)

2. If I am liable for tax, is it due immediately or when she dies?

3. If it is due when she dies, is it legitimate to tag the taxable amount on to a savings account we are setting up and earn interest on it until that time?

I have no wish to evade any tax owed but don't want to come unstuck later on through ignorance on my part.

Any help would be appreciated.

RayWolfe

There is no tax for you to pay on these gifts.
There may however be Inheritance Tax issues if your mother dies within seven years of the gift. (Almost certainly not an issue if the value of her assets is as you say.) There may also be other implications if she needs nursing care later.

brokenomore_3

Thanks Ray.
Nursing care later is unlikely as my wife was a trained nurse.

Thanks for the clarification.

Goodfriday_2

Hi, I'm worrying about possible implications of inheritance tax, and I am unclear how previous gifts are revealed. In much earlier posts here it was said that banks and building soc.s etc will tip off the tax man, but if a person has been sending out cheques and cash to various people in amounts much less than £1000 per person, but adding up to more than the £3000 per year , is there really a way of tracing it all? Who is responsible for keeping a record for the Taxman when the giver dies ??

fengirl_2

Banks and building societies don't tip off the taxman about money going into people's accounts (except if there are large cash payments when they would report under the money laundering regs). They do, however, report the amount of interest paid on all deposits. As you can imagine, HMRC receives thousands of these notifictions each year and its a mammouth job to sort it all and send it to the right tax office. In my day, we ignored all intrest under £250 and its just not possible to check all info received against tax returns. However, if an interest notification turns up whch shows a large increase in interest paid between one year and another, the tax person would be intererested. They would look at all possible explanations before asking the taxpayer for an explanation. For instance, I sold my house in August 07 and deposited a large amount into my account because I did not buy again straight away. This would be obvious from looking at my change of addresses.
Its true, small amounts of £1000, £3000 would not make a large difference to someone's interest, and as there is no liability on the recipient of the money, who cares? As you point out, the problem lies when the executors are trying to wind up the estate. A very organised person would make a list of all their donations as they went along to make the job easier then they died, but not many people think of doing this. As an orignal poster said, like most taxes, IHT is voluntary - and not every IHT return can be enqired into. The executors have to do the best job they can with the information available.

johnny_uhtar

Would appreciate any help
My mother has just died leaving me her "estate" (house etc) the house is worth about £120K so it wont be subject to inheritance tax BUT I transfered all her savings into my name about 3-4 years ago (£45k) so this would of been regarded as an outright gift if she had of lived for 7 years but as she has'nt will I have to pay income tax on it
From the website I relize this money will have to be added to her estate £120 +£45 which is still inheritence tax exempt but dont know If I fall liable for income tax ???????

dzug1

No you are not liable for income tax on a gift.

Jack.h_2

I was wondering if anyone could advise me.

My father gave some land to myself and my 2 sisters as a gift. We now want to sell it. Would we be subject to CGT? I and one sister earn less than £10,000 per year, though we are house owners and the other lives in Germany.

Thanks