Gifts tax

Barry_Bear

I think you can gift a family member £3k a year without them having to declare it and pay tax on it, and up to £325k is also tax free to the recipient unless there is inheritance tax.
Can a family member gift amounts back to the giver over following years under the same rules so the original giver may receive a regular tax free income?
Different question in the same context. Could you gift a family member share investments and if they sell some to use up their annual capital gains allowance can they gift back some or all of the amount sold? Is that allowed?

getmore4less

There is no gift tax, recipient does not have to declare any amounts.

You have to be careful with connected transactions. 

Expecting money back is a gift with reservations. 

Jeremy535897

No. An individual may make exempt gifts totalling £3,000 in a tax year, and gifts to any individuals (who don't receive any of the £3,000) up to £250 a year.

So long as there is no enforceable obligation to provide the income, a donor could give away capital and receive an income back, but all that does is increase the cumulative figure of gifts for both donor and donee.

If you give anyone but your spouse/civil partner investments, a capital gain arises at the point of gift, so nothing is achieved.

Barry_Bear

Jeremy535897 said:

No. An individual may make exempt gifts totalling £3,000 in a tax year, and gifts to any individuals (who don't receive any of the £3,000) up to £250 a year.

So long as there is no enforceable obligation to provide the income, a donor could give away capital and receive an income back, but all that does is increase the cumulative figure of gifts for both donor and donee.

If you give anyone but your spouse/civil partner investments, a capital gain arises at the point of gift, so nothing is achieved.

Are you saying that in principle it is OK to gift a family member a lump sum and for them to gift amounts back in the future? But that in the case of investment shares or funds the capital gains tax is triggered so that is the problem? Could you gift cash and the recipient invests it and returns the dividend income as a gift for example? 

Keep_pedalling

Barry_Bear said:

Jeremy535897 said:

No. An individual may make exempt gifts totalling £3,000 in a tax year, and gifts to any individuals (who don't receive any of the £3,000) up to £250 a year.

So long as there is no enforceable obligation to provide the income, a donor could give away capital and receive an income back, but all that does is increase the cumulative figure of gifts for both donor and donee.

If you give anyone but your spouse/civil partner investments, a capital gain arises at the point of gift, so nothing is achieved.

Are you saying that in principle it is OK to gift a family member a lump sum and for them to gift amounts back in the future? But that in the case of investment shares or funds the capital gains tax is triggered so that is the problem? Could you gift cash and the recipient invests it and returns the dividend income as a gift for example? 

Yes, although it sounds like we are talking about a loan rather than a gift.

Jeremy535897

It's hard to see the point, though. Any arrangement that was enforceable would probably fall foul of the gift with reservation rules. If the donor doesn't need the money back, why return it? If the donor does need the money back, don't make the gift, or just make it a loan.

getmore4less

Keep_pedalling said:

Barry_Bear said:

Jeremy535897 said:

No. An individual may make exempt gifts totalling £3,000 in a tax year, and gifts to any individuals (who don't receive any of the £3,000) up to £250 a year.

So long as there is no enforceable obligation to provide the income, a donor could give away capital and receive an income back, but all that does is increase the cumulative figure of gifts for both donor and donee.

If you give anyone but your spouse/civil partner investments, a capital gain arises at the point of gift, so nothing is achieved.

Are you saying that in principle it is OK to gift a family member a lump sum and for them to gift amounts back in the future? But that in the case of investment shares or funds the capital gains tax is triggered so that is the problem? Could you gift cash and the recipient invests it and returns the dividend income as a gift for example? 

Yes, although it sounds like we are talking about a loan rather than a gift.

it is part of the "assets  down income up" approach to IHT mitigation.

You give away a load of assets and the person that gets them provides an income to meet your needs. 

HMRC have rules in place to try to stop such schemes.

The two main ones are Gift with reservation and preowned asset taxes.
They apply to cash gifts as well as the obvious stuff like living in a gifted home or giving your kids £1m to buy a house and then moving in with them. 

There are exemptions for need and that can avoid the traps but that would need research if not already familiar with them.

As with all taxes they are self assessments so just forgetting can be an option.

There are going to be loads of people that are helping out their parents later in life that have been given big chunks of cash earlier in life.