Potential double IHT on gifts?

BobWelham

Suppose that Alan has an estate worth £525,00 and that his (unrelated) friend Bob has an estate worth £325,000.

Then Alan's estate has an IHT liability of £80,000 and Bob's an IHT liability of £0.

Alan now gives £100,000 to Bob, no strings attached.

Unfortunately, very soon afterwards there is a tragic RTA in which both Alan and Bob die.

Because very little time has passed between Alan giving away £100,000 and his death, there is no taper relief to his IHT liability. Ignoring annual exemptions etc. it remains at £80,000.

However, Bob’s estate is up to £425,000 at the time of his death, so has an IHT liability of £40,000.

Is this analysis correct, or does HMRC recognize and not enforce such potential double IHT on a gift?

BobWelham

Typo: Alan's initial estate is £525,000.

Andrew31

When will this ever happen and why do you need to know?

Linton

I think you confuse multiple issues if you say the deaths happen at the same time.  If the core question is if Alan makes a gift to Bob and dies within 7 years and Bob dies either before or after Alan or perhaps makes another gift and then dies, could both Alan's and Bob's estate be subject to tax on the same money (is it the same money or merely the same amount?)  the answer is surely yes.  The tax should match what would have happened if Alan bequeathed the money to Bob rather than gifted it.

BobWelham

Andrew31 said:

When will this ever happen and why do you need to know?

Pedantic curiosity.