HMRC/IHT definition of a gift?

getmore4less

Sea_Shell said:

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?

If a gift does not qualify for an exemption it becomes a PET.

You can choose which gift in the exemption year you want to use the exemption.

woodward2

justwhat said:

Buy the car and leave in your name. It depreciates in value anyway.

IHT limits are quite high. Husband and wife both have an allowance. You should attempt to use both allowances if IHT is an issue. eg its not always best for a couple to leave assets to each other.

The example was purely a "what if?" to get my head around what counts as a gift, but I take your point for future reference.

I was researching the subject because I'm dealing with my late Mom's estate. I had no idea it could be so complicated. Fortunately (?) her estate is very simple because we had to sell her flat to pay for care home fees and she only had £80K in total assets. I am mainly interested in now keeping records of my own to make life easier for someone else when I go!

getmore4less

justwhat said:

woodward2 said:

Hi,


A) I gift my son my car worth £1000
I gift my son £1000 to buy a car
C) I buy a car worth £1000 for my son.

Buy the car and leave in your name. It depreciates in value anyway.

IHT limits are quite high. Husband and wife both have an allowance. You should attempt to use both allowances if IHT is an issue. eg its not always best for a couple to leave assets to each other.

The introduction of transferable nil rate bands has pretty much eliminated the use or lose scenario and opened up the transfer to spouse and gift option.

The introduction of residential opened a few more use or lose scenario but most people won't hit those unless they have complicated qualifying house & beneficiary situations as the net is quite wide on what and who qualifies 

justwhat

woodward2 said:

justwhat said:

Buy the car and leave in your name. It depreciates in value anyway.

IHT limits are quite high. Husband and wife both have an allowance. You should attempt to use both allowances if IHT is an issue. eg its not always best for a couple to leave assets to each other.

The example was purely a "what if?" to get my head around what counts as a gift, but I take your point for future reference.

I was researching the subject because I'm dealing with my late Mom's estate. I had no idea it could be so complicated. Fortunately (?) her estate is very simple because we had to sell her flat to pay for care home fees and she only had £80K in total assets. I am mainly interested in now keeping records of my own to make life easier for someone else when I go!

Care home fee's - that's worth avoiding if you can.  

Keep_pedalling

justwhat said:

woodward2 said:

justwhat said:

Buy the car and leave in your name. It depreciates in value anyway.

IHT limits are quite high. Husband and wife both have an allowance. You should attempt to use both allowances if IHT is an issue. eg its not always best for a couple to leave assets to each other.

The example was purely a "what if?" to get my head around what counts as a gift, but I take your point for future reference.

I was researching the subject because I'm dealing with my late Mom's estate. I had no idea it could be so complicated. Fortunately (?) her estate is very simple because we had to sell her flat to pay for care home fees and she only had £80K in total assets. I am mainly interested in now keeping records of my own to make life easier for someone else when I go!

Care home fee's - that's worth avoiding if you can.  

You might care to end your days in Over my dead body Grange or stuck at home unable to cope because you are deemed not decrepit enough to get funding, but sensible people would be wise to maintain the choices offered by self funding. 

woodward2

Keep_pedalling said:

You might care to end your days in Over my dead body Grange or stuck at home unable to cope because you are deemed not decrepit enough to get funding, but sensible people would be wise to maintain the choices offered by self funding. 

Absolutely agree. After Dad died, Mom's dementia worsened, such that she spent two weeks in an adult mental health unit. We had her at home with us for three months, but the emotional strain of the constant paranoia was just too much. We found a care home where we felt she would be looked after well and would be as happy as she could be. Obviously that comes at a price, but I don't begrudge losing the majority of the capital from the flat sale - she was very well cared for and that is what matters to me.