Inheritance Tax and replacement windows

johnnyseven268

I am making monthly gifts to my children out of "Normal Expenditure".

I have just paid a deposit of £902 and will in the next financial year pay £3,609 on completion of replacing single glazed windows and a backdoor with double glazed windows and door.

My question is - is this classed as Capital spending or Normal expenditure spending.

If the latter, I will have to reduce my monthly gifts.

Keep_pedalling

It’s a bit of a grey area to be honest. If your estate is IHT already have you considered making one off larger gifts? Yes you have to live 7 years for them to fall out of your estate, but if you are in good health you should be able to to cover the risk off an early demise with term life insurance. 

Flugelhorn

interesting topic thanks @Keep_pedalling - must say I don't give all my excess away to the offspring I still hang on to enough to cover all major expenses so hopefully mot a problem

Linton

johnnyseven268 said:

I am making monthly gifts to my children out of "Normal Expenditure".

I have just paid a deposit of £902 and will in the next financial year pay £3,609 on completion of replacing single glazed windows and a backdoor with double glazed windows and door.

My question is - is this classed as Capital spending or Normal expenditure spending.

If the latter, I will have to reduce my monthly gifts.

Why would you have to reduce your monthly gifts dependent on whether the expenditure is from capital or income?  Not gifting cannot reduce the inheritance tax below that which would be due if you did gift from capital.  If you cant afford to gift whether the cost of improvements is counted as capital or normal expenditure would seem to be irrelevent.

The problem you have in getting answer to your question is that the level of detail of Gifts From Income you require is not specified anywhere.  HMRC can decide at the time how they will treat a claim for Gifts From Income.  If HMRC dont wish to clarify the situation the answer would only come if a case was taken to the courts. I know of only one (quite different) situation where GFI went to the courts.  

tacpot12

If you wanted to take a prudent approach you could create some records to show that your capital expenditure was capable of being replenished from your income. I save for all sorts of capital expenses, e.g. replacing the my car, on a monthly basis. Thus any income I have after left after saving for the capital items is definitely excess income. 

TheGreenFrog

johnnyseven268 said:

I am making monthly gifts to my children out of "Normal Expenditure".

I have just paid a deposit of £902 and will in the next financial year pay £3,609 on completion of replacing single glazed windows and a backdoor with double glazed windows and door.

My question is - is this classed as Capital spending or Normal expenditure spending.

If the latter, I will have to reduce my monthly gifts.

I have always taken the view that maintenance costs of your home are normal expenditures - in other words that HMRC would argue that your excess income needs to be calculated after deducting this type of expenditure.  I also therefore try to estimate very occasional expenditures such as this when setting the amount to gift so that regular changes of the gift amount can be avoided.  In fact expenditure which would not deplete the "excess income" calculation is probably quite limited, such as house purchase or major extension to house, buying shares etc

Suggest you post question on the tax forum.

johnnyseven268

Thank you for your replies. I now have the answer from HMRC the amount paid for double glazing is classed as Normal Expenditure out of income.

I think that I was too ambitious in gifting most of my state pension upon reaching the age of 66.

Flugelhorn

johnnyseven268 said:

Thank you for your replies. I now have the answer from HMRC the amount paid for double glazing is classed as Normal Expenditure out of income.

I think that I was too ambitious in gifting most of my state pension upon reaching the age of 66.

I suspect that was the case - just been doing a quick calculation and we give away something like a quarter of our excess, though varies a bit depending on need (eg I pay accommodation costs and they can vary over time)