IHT 400 - Gifts

mothballs39

Just when I think I've finished the forms, I'm now panicking about Gifts. My mother paid for her granddaughter's first car in 2014. The car came to just under £6000 so I've shown it as a gift, using the £3000 annual allowance from 2014 and from 2013. It looks very contrived on the form but it was sheer coincidence!

I haven't shown any other gifts for those two years as the forms say to ignore any small amounts under £250 per individual, but as anything else will take her over the £3000 annual limit with the car, should I show every little birthday and christmas gift for those two years? Total gifts per year average £500ish.

Thank you for your help.

Keep_pedalling

When you say total gifts of £500 per year, is that £500 purely for that one GD or for everyone?

If the latter then I would ignore those, in which case you don't even need to declare the car money because it is totally covered by her annual exemption. If on the other hand she wrote out a couple of cheques for £250 for birthday and Christmas presents for said GD then I would play safe and include them.

SeniorSam

No. Leave it as you have. The £3000 each tax year is allowable, but can you show that the gift was made around the 5/6th April, to cover the dates, or if they were cash gifts, rather than cheques, the dates cannt be proved?

Sam

mothballs39

Oh, no the car was bought in August 2014 so can I not use £3000 allowance for that tax year and £3000 for the year before? I thought you could claim for one previous year. Does the date of the gift have to overlap with the change of tax year then to claim the previous year's allowance?

The £500 gifts per year were for the whole family, involving 5 people's christmas and birthdays. I had power of attorney, so all gifts can be confirmed either by bank statement or cheques.

I'm worried that as I'm showing maximum gift allowance for two years running, HMRC will think that there must have been other small birthday/Christmas gifts which would take her over the limit, and it looks like I'm hiding this by not mentioning it. Am I overthinking again? :rotfl:

getmore4less

Has her total asset base changed significantly(downwards) in the last few years?

The smaller regular(B'day,X'mas) gifts may well fall into the regular gifts from income if these were indeed regular in previous years.

You only have to worry further if there is IHT to pay.

Keep_pedalling

mothballs39 wrote: »

Oh, no the car was bought in August 2014 so can I not use £3000 allowance for that tax year and £3000 for the year before? I thought you could claim for one previous year. Does the date of the gift have to overlap with the change of tax year then to claim the previous year's allowance?

The £500 gifts per year were for the whole family, involving 5 people's christmas and birthdays. I had power of attorney, so all gifts can be confirmed either by bank statement or cheques.

I'm worried that as I'm showing maximum gift allowance for two years running, HMRC will think that there must have been other small birthday/Christmas gifts which would take her over the limit, and it looks like I'm hiding this by not mentioning it. Am I overthinking again? :rotfl:

See pages 12 & 74 of the IHT guidance notes. You can ignore those small gifts, and you do not need to declare the car gift because it is fully covered by the annual £3000 allowance for the 2013-4 & 2014-5 tax years.

mothballs39

getmore4less wrote: »

Has her total asset base changed significantly(downwards) in the last few years?

The smaller regular(B'day,X'mas) gifts may well fall into the regular gifts from income if these were indeed regular in previous years.

You only have to worry further if there is IHT to pay.

No change downwards getmore4less. The gifts were regular amounts, although varied now and again, for the last 7 years or more.

I do have to pay IHT.

mothballs39

Keep_pedalling wrote: »

See pages 12 & 74 of the IHT guidance notes. You can ignore those small gifts, and you do not need to declare the car gift because it is fully covered by the annual £3000 allowance for the 2013-4 & 2014-5 tax years.

Thank you keep pedalling!

mothballs39

This is what is confusing me. On page 74 of IHT 400 guidance notes:

"Lifetime gifts that represent normal expenditure out of the transferor’s
income. These are exempt provided that the transferor’s established
standard of living is not reduced by the gifts, that the gifts came out of
income and not capital and there is an established pattern of giving.
These gifts can include:
• monthly or regular payments to someone, including gifts for Christmas
or other festivals, birthdays or other anniversaries
• regular premiums on a life assurance policy.
Fill in pages 2 and 6 of Schedule IHT403 Gifts and other transfers of value if you want to deduct this exemption."

Really confusing bit is in bold. Section 6 of that Schedule is a complete nightmare to complete.

It's the annual allowance of £3000 that I'm worried about. If I ignore the car, that's fine, but there's still the £500 worth of regular gifts to show which will take me to £3500 for each of the two years. Can I really ignore car and regular gifts and not complete IHT 403? Even though the two together are over the annual limit? Is this exemption just referring to larger amounts paid regularly then?

I hate this schedule!!

getmore4less

There is not an annual limit there are multiple exemptions the £3k is just one of them.

If you are comfortable that all gifts are covered by one of the exemptions then you are OK that they will not be brought back into the IHT as PETs.

AIUI gifts from income do not contribute to the £3k or £250pp exemptions which are separate anyway.

If you have identified all the gifts then I think you will be comfortable most people don't bother to go to this level for the of £100 going out in a year.

(professional executors are rarely this diligent.)

mothballs39

Thank you getmore4less. I think I can safely abandon the IHT 403 then. :T :j