Gifts out of income - how far back can you go?

davidwalters

Voyager2002 said:

davidwalters said:

Yes, currently she will be liable to some IHT on her estate. 7 year rule is almost up on a huge amount, and 3 years into another amount, but until then, all ways of mitigating have been taken. Personally, like many, I - and she -  strongly object to money that was hard-earned by my father, was taxed at 40% then, should be taxed again at 40%. So yes, all ways to avoid it have - and will - be taken.

You have the right to mitigate tax in all legal ways, and no-one could blame you for exercising that right. However, your comments about the tax system are unfortunate, and sound like an attempt to justify criminal ways of evading tax. Remember that the country as a whole is in trouble and if everyone paid their fair share of tax we would be well on the way to solving our problems. Remember also that your father's high income was mainly a matter of luck and was made possible by the hard work of others earning much less and by the facilities provided by the government and paid for out of general taxation.

I'm not sure where I said anything about 'attempting to justify criminal ways of evading tax'? Where did I say this?  But yes - I, and most I hear, do say being taxed at 40% may be fair, but to then have the same money taxed again at 40% goes against natural fairness.
There are perfectly legal ways to reduce IHT, as suggested by the Government itself. It is then upto us to use that...or lose it. And my father did not have a high income as 'a matter of luck'! What is the basis for you to say such a thing? Or maybe you feel all pay should be equal? You know nothing about him, so how dare you suggest such a thing. He worked very hard, and actually, for most of his life, did NOT earn that much, until British Gas became privatised. And thanks in many ways to him, we have been able to enjoy natural gas, as he was very much involved with that being brought to the UK, along, obviously, with all the manual workers, who I'm sure should have been paid better.   All a bit off my original question, but don't say things that are not true.

davidwalters

[Deleted User] said:

Would these additional lump sum payments satisfy the following?

1. They form a part of your 'normal expenditure' and are paid out on a regular basis.

Yes, they do.

Grumpy_chap

davidwalters said:

Grumpy_chap said:

davidwalters said:

She wants to give all excess income, to reduce IHT.

Is her estate actually going to be liable for IHT?

davidwalters said:

It is for her best interests in that should she require to use more income herself, then we adjust the 'excess' accordingly. She lives very well, and is lucky to have a massive pension.

You making the decision that your mother gives her money away to you (which seems to be what you are describing) will always be open to challenge.
You avoided, so far as I can tell, answering whether you are acting under PoA.
Will your mother ever need funds for care purposes?

You seem to be turning this against me! All I've asked is a question about how back we can go!! Yes, in certain matters I am POA. Not avoiding saying this; it just isn't relevant to my question.  BUT, like I said, SHE wants to do this, and signed a letter 4 years ago to this effect. AND, like I said, she has a massive pension, AND lots of cash for if and when she needs care, which will last her many years in a care home. She is 91 now.

I was not turning things against you and sorry you feel that way.
Just drawing attention to the limitations of PoA.  It's good that you know, but there are enough threads where people ask questions and it is clear that the knowledge is not that good around what can and cannot be done.

Jeremy535897

It's not a lack of knowledge, it's that the legislation does not cover every eventuality and the HMRC manual is not definitive. Income becomes capital after two years in the absence of contrary indicators, but those indicators are not specified. I would suggest that if the income just sat in a bank current account, that is a contrary indicator to it becoming capital even after two years. if it was invested in stocks and shares that would have to be sold to make the gifts, then I believe those funds are capital, probably from the point of investment, rather than after two years.

davidwalters

Grumpy_chap said:

davidwalters said:

Grumpy_chap said:

davidwalters said:

She wants to give all excess income, to reduce IHT.

Is her estate actually going to be liable for IHT?

davidwalters said:

It is for her best interests in that should she require to use more income herself, then we adjust the 'excess' accordingly. She lives very well, and is lucky to have a massive pension.

You making the decision that your mother gives her money away to you (which seems to be what you are describing) will always be open to challenge.
You avoided, so far as I can tell, answering whether you are acting under PoA.
Will your mother ever need funds for care purposes?

You seem to be turning this against me! All I've asked is a question about how back we can go!! Yes, in certain matters I am POA. Not avoiding saying this; it just isn't relevant to my question.  BUT, like I said, SHE wants to do this, and signed a letter 4 years ago to this effect. AND, like I said, she has a massive pension, AND lots of cash for if and when she needs care, which will last her many years in a care home. She is 91 now.

I was not turning things against you and sorry you feel that way.
Just drawing attention to the limitations of PoA.  It's good that you know, but there are enough threads where people ask questions and it is clear that the knowledge is not that good around what can and cannot be done.

I only feel that way because you accused me of something that's not evidenced! There may be enough threads but I've no idea where they are so I asked the question. Thanks to some responses, I have a slightly better idea now. But you are right: it's not that clear what is ok, that's for sure. But they'll catch us out if they can, even if it's not clear. HMRC usually win, even if it's not clear in the first place! So I am just trying to do the official correct thing.

davidwalters

Jeremy535897 said:

It's not a lack of knowledge, it's that the legislation does not cover every eventuality and the HMRC manual is not definitive. Income becomes capital after two years in the absence of contrary indicators, but those indicators are not specified. I would suggest that if the income just sat in a bank current account, that is a contrary indicator to it becoming capital even after two years. if it was invested in stocks and shares that would have to be sold to make the gifts, then I believe those funds are capital, probably from the point of investment, rather than after two years.

Yes, I agree with you. In my Mum's case, it's just sat in the bank account, not invested into anything, nor made capital, so some loss has been made, from 3 years ago, unfortunately. I'm a strong believer in that anyone SHOULD have the right to do what they choose with THEIR hard-earned money, especially after it's been taxed at source, but there we are. But we're onto it, from now on, that's for sure. Of course the 3000 you can give away tax-free, and the various 250s the same, have not increased for 40 years, which is outrageous!

Voyager2002

davidwalters said:

Voyager2002 said:

davidwalters said:

Yes, currently she will be liable to some IHT on her estate. 7 year rule is almost up on a huge amount, and 3 years into another amount, but until then, all ways of mitigating have been taken. Personally, like many, I - and she -  strongly object to money that was hard-earned by my father, was taxed at 40% then, should be taxed again at 40%. So yes, all ways to avoid it have - and will - be taken.

You have the right to mitigate tax in all legal ways, and no-one could blame you for exercising that right. However, your comments about the tax system are unfortunate, and sound like an attempt to justify criminal ways of evading tax. Remember that the country as a whole is in trouble and if everyone paid their fair share of tax we would be well on the way to solving our problems. Remember also that your father's high income was mainly a matter of luck and was made possible by the hard work of others earning much less and by the facilities provided by the government and paid for out of general taxation.

I'm not sure where I said anything about 'attempting to justify criminal ways of evading tax'? Where did I say this?  But yes - I, and most I hear, do say being taxed at 40% may be fair, but to then have the same money taxed again at 40% goes against natural fairness.
There are perfectly legal ways to reduce IHT, as suggested by the Government itself. It is then upto us to use that...or lose it. And my father did not have a high income as 'a matter of luck'! What is the basis for you to say such a thing? Or maybe you feel all pay should be equal? You know nothing about him, so how dare you suggest such a thing. He worked very hard, and actually, for most of his life, did NOT earn that much, until British Gas became privatised. And thanks in many ways to him, we have been able to enjoy natural gas, as he was very much involved with that being brought to the UK, along, obviously, with all the manual workers, who I'm sure should have been paid better.   All a bit off my original question, but don't say things that are not true.

It was a matter of luck that British Gas was privatised, so that some of their managers were lavishly rewarded while similar people working in the public sector faced pay freezes and increased work loads. 

davidwalters

Voyager2002 said:

davidwalters said:

Voyager2002 said:

davidwalters said:

Yes, currently she will be liable to some IHT on her estate. 7 year rule is almost up on a huge amount, and 3 years into another amount, but until then, all ways of mitigating have been taken. Personally, like many, I - and she -  strongly object to money that was hard-earned by my father, was taxed at 40% then, should be taxed again at 40%. So yes, all ways to avoid it have - and will - be taken.

You have the right to mitigate tax in all legal ways, and no-one could blame you for exercising that right. However, your comments about the tax system are unfortunate, and sound like an attempt to justify criminal ways of evading tax. Remember that the country as a whole is in trouble and if everyone paid their fair share of tax we would be well on the way to solving our problems. Remember also that your father's high income was mainly a matter of luck and was made possible by the hard work of others earning much less and by the facilities provided by the government and paid for out of general taxation.

I'm not sure where I said anything about 'attempting to justify criminal ways of evading tax'? Where did I say this?  But yes - I, and most I hear, do say being taxed at 40% may be fair, but to then have the same money taxed again at 40% goes against natural fairness.
There are perfectly legal ways to reduce IHT, as suggested by the Government itself. It is then upto us to use that...or lose it. And my father did not have a high income as 'a matter of luck'! What is the basis for you to say such a thing? Or maybe you feel all pay should be equal? You know nothing about him, so how dare you suggest such a thing. He worked very hard, and actually, for most of his life, did NOT earn that much, until British Gas became privatised. And thanks in many ways to him, we have been able to enjoy natural gas, as he was very much involved with that being brought to the UK, along, obviously, with all the manual workers, who I'm sure should have been paid better.   All a bit off my original question, but don't say things that are not true.

It was a matter of luck that British Gas was privatised, so that some of their managers were lavishly rewarded while similar people working in the public sector faced pay freezes and increased work loads. 

Voyager2002 said:

davidwalters said:

Voyager2002 said:

davidwalters said:

Yes, currently she will be liable to some IHT on her estate. 7 year rule is almost up on a huge amount, and 3 years into another amount, but until then, all ways of mitigating have been taken. Personally, like many, I - and she -  strongly object to money that was hard-earned by my father, was taxed at 40% then, should be taxed again at 40%. So yes, all ways to avoid it have - and will - be taken.

You have the right to mitigate tax in all legal ways, and no-one could blame you for exercising that right. However, your comments about the tax system are unfortunate, and sound like an attempt to justify criminal ways of evading tax. Remember that the country as a whole is in trouble and if everyone paid their fair share of tax we would be well on the way to solving our problems. Remember also that your father's high income was mainly a matter of luck and was made possible by the hard work of others earning much less and by the facilities provided by the government and paid for out of general taxation.

I'm not sure where I said anything about 'attempting to justify criminal ways of evading tax'? Where did I say this?  But yes - I, and most I hear, do say being taxed at 40% may be fair, but to then have the same money taxed again at 40% goes against natural fairness.
There are perfectly legal ways to reduce IHT, as suggested by the Government itself. It is then upto us to use that...or lose it. And my father did not have a high income as 'a matter of luck'! What is the basis for you to say such a thing? Or maybe you feel all pay should be equal? You know nothing about him, so how dare you suggest such a thing. He worked very hard, and actually, for most of his life, did NOT earn that much, until British Gas became privatised. And thanks in many ways to him, we have been able to enjoy natural gas, as he was very much involved with that being brought to the UK, along, obviously, with all the manual workers, who I'm sure should have been paid better.   All a bit off my original question, but don't say things that are not true.

It was a matter of luck that British Gas was privatised, so that some of their managers were lavishly rewarded while similar people working in the public sector faced pay freezes and increased work loads. 

Sorry, I think it's Capitalism!  Meaning, if a business does well, then money is dished out to those that made it do well. Sure, lower down the chain would get less, but that's always the case. And don't talk to me about public sector; I was a state primary school teacher my whole working life!  But how come you mentioned my Dad was lucky? How did you make any such assumption about him...unless you know me?  But anyway, NONE of this has ANYthing to do with my question, which was a very simple tax question to do with IHT, about a certain LEGITIMATE rule....and it would seem that the answer is, um, rather unclear. WHY you brought my dad into this, is rather odd, and not necessary.