HMRC/IHT definition of a gift?

Sea_Shell

Langtang said:

getmore4less said:

Marcon said:

Sea_Shell said:

What's the phrase used a lot...

You can't make your IHT position worse by gifting.

...although you could make the position of the recipients worse if there's not enough in your estate when you die to pay the IHT...

Very rare and then only for those getting very large gifts or at the tail end of a series of gifts.

Still less than the gift value but an issue if not liquid or spent.

This is interesting. I may be missing the obvious, but if there's not enough in the estate, then surely it wouldn't attract IHT?

If I gifted £10k and died 2 years later, I had always assumed (that word again) that it would be my estate that paid the IHT if it were due?

If I were to die with no money, would the person I gifted the money to have to pay anything to HMRC?

EDIT: Of course, If you had no money and a £2m house then I would have thought that the house would have to be liquidated to pay IHT?

But if you'd gifted that £2m house...

You give everything away, and die next year...big IHT bill.   The recipients of the gifts will be expected to pay it.

Problem (for them) if they have spent it, or are living in it!!!

justwhat

Langtang said:

This is interesting. I may be missing the obvious, but if there's not enough in the estate, then surely it wouldn't attract IHT?

If I gifted £10k and died 2 years later, I had always assumed (that word again) that it would be my estate that paid the IHT if it were due?

If I were to die with no money, would the person I gifted the money to have to pay anything to HMRC?

EDIT: Of course, If you had no money and a £2m house then I would have thought that the house would have to be liquidated to pay IHT?

Keeping it simple 300k to daughter then 300k to son. You die after 2 years with no assets or some. IHT is due. if there is no assets daughter / son would need to pay up .

getmore4less

Langtang said:

getmore4less said:

Marcon said:

Sea_Shell said:

What's the phrase used a lot...

You can't make your IHT position worse by gifting.

...although you could make the position of the recipients worse if there's not enough in your estate when you die to pay the IHT...

Very rare and then only for those getting very large gifts or at the tail end of a series of gifts.

Still less than the gift value but an issue if not liquid or spent.

This is interesting. I may be missing the obvious, but if there's not enough in the estate, then surely it wouldn't attract IHT?

If I gifted £10k and died 2 years later, I had always assumed (that word again) that it would be my estate that paid the IHT if it were due?

If I were to die with no money, would the person I gifted the money to have to pay anything to HMRC?

EDIT: Of course, If you had no money and a £2m house then I would have thought that the house would have to be liquidated to pay IHT?

Gifts use up nil rate band first,  the PET total in the last 7 years needs to get quite large for it to start being a potential problem

Most people don't give everything away and with estates that might have an issue donor  should be researching getting advice


With your 2m house if that was a gifted but still lived in there is a gift with reservation that would attract IHT but could be no assets in the estate to pay it. 

The HMRC manual is the place to start if you want to delve deep, this seems to be one place to start.
https://www.gov.uk/hmrc-internal-manuals/inheritance-tax-manual/ihtm14502

Keep_pedalling

We are not in anyway frugal so we don’t have any excess income we can use but we do ,are substantial gifts from savings, and use up all of our annual exemptions. So our annual £3000 allowances goes to our children £250 to top up each grandchild’s JISA and £250 to each spouse (£8500 total)

We also have a number of potential exempt gifts (PETs), gifts above the annual allowance to our 2 children and nursery school fees.

We keep a record of each of those with our wills to make life easier for our executor.


There are other things we don’t record.

Christmas and Birthday presents (<£100), the occasional meal, and practical gifts for the GC such as clothing and books.

Recently we have taken to hiring more upmarket holiday accommodation for our own use (Villas in France and Italy with a pool or holiday cottages in the UK). These properties always come with more than one bedroom so we invite our children and sometimes friends to join us. As we pay the same if we end up on our own or with a number of house guests I put no monetary value against the gift so it does not go on record.

I will be interested in other people’s views on the last item.

Sea_Shell

I don't see how any outgoing, where "stuff" isn't bought, whether to a travel company or supermarket etc. can ever be traced as being a gift.

If you have a £5000 holiday, who's to ever know (in officialdom) who benefited from said holiday.


Also, with regards the £3000 allowance, is this in addition to the ad hoc £250s?  I thought £3000 in total was the max?

relaxtwotribes

Keep_pedalling said:

Recently we have taken to hiring more upmarket holiday accommodation for our own use (Villas in France and Italy with a pool or holiday cottages in the UK). These properties always come with more than one bedroom so we invite our children and sometimes friends to join us. As we pay the same if we end up on our own or with a number of house guests I put no monetary value against the gift so it does not go on record.

I will be interested in other people’s views on the last item.

I suspect that when any of your relatives come and stay the night in your home then you do not record that as having made a gift.  So the holiday cottage falls into the same category IMO.  If you were to pay for their flight to France/Italy and their car hire then you might have difficulty persuading HMRC (how would they know?) that is not a gift.

Keep_pedalling

Sea_Shell said:

Also, with regards the £3000 allowance, is this in addition to the ad hoc £250s?  I thought £3000 in total was the max?

Yes it is, so for example if you have used your £3000 exemption on your children you can give all your other family and friends £250 each. 

Keep_pedalling

relaxtwotribes said:

Keep_pedalling said:

Recently we have taken to hiring more upmarket holiday accommodation for our own use (Villas in France and Italy with a pool or holiday cottages in the UK). These properties always come with more than one bedroom so we invite our children and sometimes friends to join us. As we pay the same if we end up on our own or with a number of house guests I put no monetary value against the gift so it does not go on record.

I will be interested in other people’s views on the last item.

I suspect that when any of your relatives come and stay the night in your home then you do not record that as having made a gift.  So the holiday cottage falls into the same category IMO.  If you were to pay for their flight to France/Italy and their car hire then you might have difficulty persuading HMRC (how would they know?) that is not a gift.

The how would they know question is a good one. It basically relies on the honesty of the executor and having access to honest records from the deceased. In reality  HMRC are only going to be looking closely as this in a tiny number of cases where they already suspect fraud. 

HappyHarry

Keeping it simple 300k to daughter then 300k to son. You die after 2 years with no assets or some. IHT is due. if there is no assets daughter / son would need to pay up .

Assuming no transferable nil rate bands are available, the son would need to pay up regardless of assets in the estate.

Gifts in excess of the nil rate band are taxable on the recipient, not the estate. Taper relief may be available.

Langtang

HappyHarry said:

Keeping it simple 300k to daughter then 300k to son. You die after 2 years with no assets or some. IHT is due. if there is no assets daughter / son would need to pay up .

Assuming no transferable nil rate bands are available, the son would need to pay up regardless of assets in the estate.

Gifts in excess of the nil rate band are taxable on the recipient, not the estate. Taper relief may be available.

Is NRB not £325?