IHT 403 - Gifts made out of regular income

dales1

The best way is to compile a draft IHT 403 yourself, each year while you are still able to.

File it in your records for your executor.

That's what I do.

(PS and a draft Probate form PA1P is also helpful for executors).

J34

Thanks dales1.

It may be helpful to quote what the Act says about a gift out of income:
"that it was made as part of the normal expenditure of the transferor"
It doesn't say that the gifts have to be regular, just normal expenditure. So, presumably, at the end of the tax year one can see what surplus income one has and give it away and do that "normally" perhaps to different recipients and with varying amounts. (As one might spend on a holiday or painting the house.)
Another cause for obfuscation: the word "regular" doesn't appear in the Act (IHT 1984).

eskbanker

J34 said:

It may be helpful to quote what the Act says about a gift out of income:
"that it was made as part of the normal expenditure of the transferor"
It doesn't say that the gifts have to be regular, just normal expenditure. So, presumably, at the end of the tax year one can see what surplus income one has and give it away and do that "normally" perhaps to different recipients and with varying amounts. (As one might spend on a holiday or painting the house.)
Another cause for obfuscation: the word "regular" doesn't appear in the Act (IHT 1984).

It's true that 'regular' and 'normal' aren't entirely synonymous, and it's the latter that is used in the legislation, but there's plenty of guidance about interpretation, in which it's clear that it's not necessary to gift monthly or even annually, but there should be some discernible pattern:

You must test the whether a gift is ‘normal’ by considering all the relevant factors. These will include the frequency and amount, the nature of the gifts, the identity of those who received them and the reasons for the gifts.

Frequency

Normal does not necessarily mean regular or annual although gifts made on a regular basis are more likely to meet the normality test. In many cases averaging the yearly amount of the transferor’s gifts of a particular type will help to form a fair opinion.

https://www.gov.uk/hmrc-internal-manuals/inheritance-tax-manual/ihtm14243