HMRC/IHT definition of a gift?

Keep_pedalling

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.

Although that is true, HMRC don’t actually care where the money comes from and most executors would pay the tax bill from the residual estate.

HappyHarry

Langtang said:

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?

Assuming it is in this example then;

The first gift to the daughter of £300k uses up £300k of the NRB. 

The second gift to the son of £300k uses up the remaining £25k of the NRB, leaving £275k taxable at 40% on the son. I.e. the son is left with a tax bill of £110k, whereas the daughter who received the first gift has no tax to pay.

Langtang

HappyHarry said:

Langtang said:

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?

Assuming it is in this example then;

The first gift to the daughter of £300k uses up £300k of the NRB. 

The second gift to the son of £300k uses up the remaining £25k of the NRB, leaving £275k taxable at 40% on the son. I.e. the son is left with a tax bill of £110k, whereas the daughter who received the first gift has no tax to pay.

Wow! I see, thanks for that.

 Being pedantic for a second, what would happen in the scenario of both gifts being made together? Who would pay. I am assuming that not many people would be daft enough to gift that much money - and if they did, they would be saying to son/daughter to keep 40% tucked away for a period (or gift them 40% more....)

HappyHarry

Keep_pedalling said:

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.

Although that is true, HMRC don’t actually care where the money comes from and most executors would pay the tax bill from the residual estate.

Agreed. But people should be aware of this wrinkle , even if to make sure that no beneficiaries will lose out by way of an empty estate, or by falling out with other beneficiaries. 

In this example, if the son and daughter did not get along, and the estate did not have sufficient assets, there could be an issue for the son.

Keep_pedalling

HappyHarry said:

Keep_pedalling said:

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.

Although that is true, HMRC don’t actually care where the money comes from and most executors would pay the tax bill from the residual estate.

Agreed. But people should be aware of this wrinkle , even if to make sure that no beneficiaries will lose out by way of an empty estate, or by falling out with other beneficiaries. 

In this example, if the son and daughter did not get along, and the estate did not have sufficient assets, there could be an issue for the son.

Luckily few of us will ever have this problem

HappyHarry

Langtang said:

HappyHarry said:

Langtang said:

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?

Assuming it is in this example then;

The first gift to the daughter of £300k uses up £300k of the NRB. 

The second gift to the son of £300k uses up the remaining £25k of the NRB, leaving £275k taxable at 40% on the son. I.e. the son is left with a tax bill of £110k, whereas the daughter who received the first gift has no tax to pay.

Wow! I see, thanks for that.

 Being pedantic for a second, what would happen in the scenario of both gifts being made together? Who would pay. I am assuming that not many people would be daft enough to gift that much money - and if they did, they would be saying to son/daughter to keep 40% tucked away for a period (or gift them 40% more....)

I believe that son and daughter would be liable for half the liability each.

 @Keep_pedalling - can you confirm? You are far more experienced in the intricacies than I am.

Keep_pedalling

HappyHarry said:

Langtang said:

HappyHarry said:

Langtang said:

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?

Assuming it is in this example then;

The first gift to the daughter of £300k uses up £300k of the NRB. 

The second gift to the son of £300k uses up the remaining £25k of the NRB, leaving £275k taxable at 40% on the son. I.e. the son is left with a tax bill of £110k, whereas the daughter who received the first gift has no tax to pay.

Wow! I see, thanks for that.

 Being pedantic for a second, what would happen in the scenario of both gifts being made together? Who would pay. I am assuming that not many people would be daft enough to gift that much money - and if they did, they would be saying to son/daughter to keep 40% tucked away for a period (or gift them 40% more....)

I believe that son and daughter would be liable for half the liability each.

 @Keep_pedalling - can you confirm? You are far more experienced in the intricacies than I am.

if the gifts were made at the same time, yes the tax falls on them equally.

Sea_Shell

Keep_pedalling said:

HappyHarry said:

Langtang said:

HappyHarry said:

Langtang said:

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?

Assuming it is in this example then;

The first gift to the daughter of £300k uses up £300k of the NRB. 

The second gift to the son of £300k uses up the remaining £25k of the NRB, leaving £275k taxable at 40% on the son. I.e. the son is left with a tax bill of £110k, whereas the daughter who received the first gift has no tax to pay.

Wow! I see, thanks for that.

 Being pedantic for a second, what would happen in the scenario of both gifts being made together? Who would pay. I am assuming that not many people would be daft enough to gift that much money - and if they did, they would be saying to son/daughter to keep 40% tucked away for a period (or gift them 40% more....)

I believe that son and daughter would be liable for half the liability each.

 @Keep_pedalling - can you confirm? You are far more experienced in the intricacies than I am.

if the gifts were made at the same time, yes the tax falls on them equally.

For completeness, would "at the same time" be literally the same day, or same tax year or same calendar year (for IHT purposes)

Is the 7 year rule tax year, or calendar year?

HappyHarry

Sea_Shell said:

Keep_pedalling said:

HappyHarry said:

Langtang said:

HappyHarry said:

Langtang said:

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?

Assuming it is in this example then;

The first gift to the daughter of £300k uses up £300k of the NRB. 

The second gift to the son of £300k uses up the remaining £25k of the NRB, leaving £275k taxable at 40% on the son. I.e. the son is left with a tax bill of £110k, whereas the daughter who received the first gift has no tax to pay.

Wow! I see, thanks for that.

 Being pedantic for a second, what would happen in the scenario of both gifts being made together? Who would pay. I am assuming that not many people would be daft enough to gift that much money - and if they did, they would be saying to son/daughter to keep 40% tucked away for a period (or gift them 40% more....)

I believe that son and daughter would be liable for half the liability each.

 @Keep_pedalling - can you confirm? You are far more experienced in the intricacies than I am.

if the gifts were made at the same time, yes the tax falls on them equally.

For completeness, would "at the same time" be literally the same day, or same tax year or same calendar year (for IHT purposes)

Is the 7 year rule tax year, or calendar year?

Same day.

The seven years ends on the date of death, neither tax year nor calendar year e.g,  a gift made on 12 June 2015 will complete its seven years on 12 June 2022.

Sea_Shell

HappyHarry said:

Sea_Shell said:

Keep_pedalling said:

HappyHarry said:

Langtang said:

HappyHarry said:

Langtang said:

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?

Assuming it is in this example then;

The first gift to the daughter of £300k uses up £300k of the NRB. 

The second gift to the son of £300k uses up the remaining £25k of the NRB, leaving £275k taxable at 40% on the son. I.e. the son is left with a tax bill of £110k, whereas the daughter who received the first gift has no tax to pay.

Wow! I see, thanks for that.

 Being pedantic for a second, what would happen in the scenario of both gifts being made together? Who would pay. I am assuming that not many people would be daft enough to gift that much money - and if they did, they would be saying to son/daughter to keep 40% tucked away for a period (or gift them 40% more....)

I believe that son and daughter would be liable for half the liability each.

 @Keep_pedalling - can you confirm? You are far more experienced in the intricacies than I am.

if the gifts were made at the same time, yes the tax falls on them equally.

For completeness, would "at the same time" be literally the same day, or same tax year or same calendar year (for IHT purposes)

Is the 7 year rule tax year, or calendar year?

Same day.

The seven years ends on the date of death, neither tax year nor calendar year e.g,  a gift made on 12 June 2015 will complete its seven years on 12 June 2022.

Sorry yes, I worded it badly.  I meant a "gift" calender year (rolling 12 months) rather than January to December.

But the gift allowances are per tax year, are they not?