Help with IHT403 Gifts form

naedanger

Keep_pedalling said:

abukco said:

Help! Advice needed with the dreaded IHT403 form. Just dealing with my Father's estate, unfortunately he died two months short of 30k being outside the 7 year exemption.

I have found out that 'Gifts out of Income' are separate to the 'Annual Allowance' and both can be used together The Annual Allowance is 3k per parent and can be made up to 6k each, if neither parent gifted this amount to the recipient the year before.

My question is, can I put down 12k exemption from both parents (6k + 6k) for the 30k, reducing it to 18k?

Mum passed away in 2018 and I didn't list any exemptions then as everything passed to Dad and they were down as 50% on the bank accounts, so the 30k passed to Dad's estate.

Do you think HMRC will go for the 12k reduction on the 30k, which is 7 years old?

If anyone can help I'd be grateful.

Yes you can do that but your mother’s share of the gift will reduce her transferable NRB by £6k.

Why if it is covered by her annual allowances? 

Keep_pedalling

naedanger said:

Keep_pedalling said:

abukco said:

Help! Advice needed with the dreaded IHT403 form. Just dealing with my Father's estate, unfortunately he died two months short of 30k being outside the 7 year exemption.

I have found out that 'Gifts out of Income' are separate to the 'Annual Allowance' and both can be used together The Annual Allowance is 3k per parent and can be made up to 6k each, if neither parent gifted this amount to the recipient the year before.

My question is, can I put down 12k exemption from both parents (6k + 6k) for the 30k, reducing it to 18k?

Mum passed away in 2018 and I didn't list any exemptions then as everything passed to Dad and they were down as 50% on the bank accounts, so the 30k passed to Dad's estate.

Do you think HMRC will go for the 12k reduction on the 30k, which is 7 years old?

If anyone can help I'd be grateful.

Yes you can do that but your mother’s share of the gift will reduce her transferable NRB by £6k.

Why if it is covered by her annual allowances? 

It was a joint gift of £30k of which only £12k was exempt. My £6k was a typo it should have read £9k ( half the non exempt part of the gift) 

naedanger

Keep_pedalling said:

naedanger said:

Keep_pedalling said:

abukco said:

Help! Advice needed with the dreaded IHT403 form. Just dealing with my Father's estate, unfortunately he died two months short of 30k being outside the 7 year exemption.

I have found out that 'Gifts out of Income' are separate to the 'Annual Allowance' and both can be used together The Annual Allowance is 3k per parent and can be made up to 6k each, if neither parent gifted this amount to the recipient the year before.

My question is, can I put down 12k exemption from both parents (6k + 6k) for the 30k, reducing it to 18k?

Mum passed away in 2018 and I didn't list any exemptions then as everything passed to Dad and they were down as 50% on the bank accounts, so the 30k passed to Dad's estate.

Do you think HMRC will go for the 12k reduction on the 30k, which is 7 years old?

If anyone can help I'd be grateful.

Yes you can do that but your mother’s share of the gift will reduce her transferable NRB by £6k.

Why if it is covered by her annual allowances? 

It was a joint gift of £30k of which only £12k was exempt. My £6k was a typo it should have read £9k ( half the non exempt part of the gift) 

Fair enough, but I think that could well result in an increase in the tax bill.

Tax iro gifts:

Option A:
Allow for £30k gift all from father's estate = £24k after allowance, taxed at 8% (after taper relief) gives £1,920 tax

Option B:
Allow for £15k gift from father's estate = £9k after allowance, taxed at 8% (after taper relief) gives £720 tax
Allow for £15k gift from mother's estate = £9k after allowance. This reduces her NRB by £9k. The tax arising in the late father's estate because it has £9k less of transferred NRB = £9k at 40% gives £3,600 tax. Total tax iro gifts = £720 + £3,600 = £4,320 so increases tax bill by £2,400. 

This assumes the estate is sufficiently over its IHT threshold that the full amount of the gift is over the tax threshold. (If only part of the gift is over the IHT threshold the figures will be different.)

abukco

I'm still confused as to what to put, the 30k gift down as. Which is the best outcome. Should I just put 6k exemption from my Father's estate and not include my Mother's 6k?

Also I didn't mention this gift on my Mother's iht205, will that be an issue? I took advice from a FA who said it would pass to fathers estate so no need to mention until he passed.

I just know weather to put 12k or 6k down for exemption. 

What would others do? 
I did put Mum down as 50% I believe in their accounts but this might be a mistake as Mum didn't work and  dad did so probably should have been 75% Dad and 25% Mum.

I'm so stressed by it all. If someone can suggest what they would suggest putting down so I can get forms in and move on, I'd be so grateful.

abukco

So Naedanger, you are suggesting that option A is best scenario and I just use 6k from my Father's estate because if I use 6k from my Mother's, this will reduce her NRB and this would actually result in a higher tax bill?

So better that I just use 6k exemption from Dad's estate?

Keep_pedalling

naedanger said:

Keep_pedalling said:

naedanger said:

Keep_pedalling said:

abukco said:

Help! Advice needed with the dreaded IHT403 form. Just dealing with my Father's estate, unfortunately he died two months short of 30k being outside the 7 year exemption.

I have found out that 'Gifts out of Income' are separate to the 'Annual Allowance' and both can be used together The Annual Allowance is 3k per parent and can be made up to 6k each, if neither parent gifted this amount to the recipient the year before.

My question is, can I put down 12k exemption from both parents (6k + 6k) for the 30k, reducing it to 18k?

Mum passed away in 2018 and I didn't list any exemptions then as everything passed to Dad and they were down as 50% on the bank accounts, so the 30k passed to Dad's estate.

Do you think HMRC will go for the 12k reduction on the 30k, which is 7 years old?

If anyone can help I'd be grateful.

Yes you can do that but your mother’s share of the gift will reduce her transferable NRB by £6k.

Why if it is covered by her annual allowances? 

It was a joint gift of £30k of which only £12k was exempt. My £6k was a typo it should have read £9k ( half the non exempt part of the gift) 

Fair enough, but I think that could well result in an increase in the tax bill.

Tax iro gifts:

Option A:
Allow for £30k gift all from father's estate = £24k after allowance, taxed at 8% (after taper relief) gives £1,920 tax

Option B:
Allow for £15k gift from father's estate = £9k after allowance, taxed at 8% (after taper relief) gives £720 tax
Allow for £15k gift from mother's estate = £9k after allowance. This reduces her NRB by £9k. The tax arising in the late father's estate because it has £9k less of transferred NRB = £9k at 40% gives £3,600 tax. Total tax iro gifts = £720 + £3,600 = £4,320 so increases tax bill by £2,400. 

This assumes the estate is sufficiently over its IHT threshold that the full amount of the gift is over the tax threshold. (If only part of the gift is over the IHT threshold the figures will be different.)

Taper relief only applies if gifts exceed the NRB and then only to the part of the gift exceeding the NRB, so does not apply in option A. IHT on option A will therefore be £9600.

naedanger

abukco said:

So Naedanger, you are suggesting that option A is best scenario and I just use 6k from my Father's estate because if I use 6k from my Mother's, this will reduce her NRB and this would actually result in a higher tax bill?

So better that I just use 6k exemption from Dad's estate?

No unfortunately I was mistaken. As Keep-pedalling has said there is no taper relief on these gifts, which makes it much simpler (and the tax position much worst than I have shown). Sorry.

If you can argue that the gifts were joint then you only need to show half the gift on your father's forms i.e. £9k after allowances. But since you should have put through a gift of £15k or £9k after allowances on your mother's estate that would reduce the amount of transferred NRB by £9k. So you should only use a transferred nil rate band of £316k from your mother's estate. That will result in a lower tax bill than putting the gift down as from your father (being £24k after his allowances) but it may be questioned why your mother's estate did not show the gift. (Perhaps just an oversight.)

abukco

Can the gift of deceased's car, to one of their offspring, a year before death, that was given as a Christmas present, go down under gifts out of excess income on IHT403?

Keep_pedalling

abukco said:

Can the gift of deceased's car, to one of their offspring, a year before death, that was given as a Christmas present, go down under gifts out of excess income on IHT403?

Absolutely not. You really have to be very carefully with gifts from excess income, and you would be wise to take professional advice before submitting the forms to HMRC. 

abukco

On IHT400, question 82: Other Liabilities, here I have listed: 

Halifax House insurance Renewal    £147
Halifax Emergency cover Renewal    £44
Window Repair Due to Break in.         £90

I had to renew the house insurance and the emergency cover since Dad died, which I had to use when the house got broken into while empty. I had to call them to come out to board up the window at 2am.

My question is, will these be covered under other liabilities?