IHT and life time gifts

TheGreenFrog

Sterlingtimes said:

Could I add a more specific scenario, please?

A child who has lived with his parents for many years buys his own house. The surveyor identifies numerous issues that need correction, e.g. windows, doors, electrics, roofing. The parents commission a builder to perform all remedial work and say to the builder, "Please invoice us." Is that a gift based on the questions already answered?

Yes it is a gift.  It could be either a PET or a chargeable lifetime transfer, or a mixture of the two.  If you give the money to your child to pay the builder it will be a PET.  In brief a PET is only chargeable to IHT on death, but a chargeable lifetime transfer can be subject to tax before death (in particular if other chargeable lifetime transfers within seven years exceed the IHT band).  Allowing child to live rent free and decorating yourselves are not gifts as you are not giving away anything of value (apart from your time).

silvercar

So Mum can’t pay off child’s student loan, but Mum could decide to pay tuition fees/ maintenance support of their student offspring, rather than them taking a student loan.

Sterlingtimes

[Deleted User] said:

Let's pretend that your executors want to do a really good job and go through everything with a fine-tooth comb.   And mum/dad don't want to embarress the executors and so preserve fantastically good records.

Thank you, [Deleted User]. You have been generous with your time, and I am grateful. You do not live up to your name because you have considerably simplified matters in providing your model with illustrations. The answer then to many of my questions in my opening post could be "yes".

If we disregard the exemptions, then there appears to be an unwritten size test. We might ask how the average HMRC inspector would behave with his own children. 

An ordinary parent on having his gutters cleaned could say to the gutterman, "While you are cleaning my gutters, could you pop round to my son's house and I'll pay you for both". The parent pays £250 in total by credit card. That might be the sort of thing that a parent would do and think no more about it. But would the HMRC tax inspector do this for his son and make appropriate records?

However, when the amounts become larger, e.g. I pay a builder £5,000 to work at my son's house, that appears to cross the line. 

It might be the case that all of the little things that ordinary parents do to help their children fall beneath the radar, and the HMRC would not ordinarily probe. Therefore, even the child who endlessly guzzles pate de foie gras and spends thirty minutes having power showers at his parents' expense will escape taxation.

silvercar

Sterlingtimes said:

[Deleted User] said:

Let's pretend that your executors want to do a really good job and go through everything with a fine-tooth comb.   And mum/dad don't want to embarress the executors and so preserve fantastically good records.

Thank you, [Deleted User]. You have been generous with your time, and I am grateful. You do not live up to your name because you have considerably simplified matters in providing your model with illustrations. The answer then to many of my questions in my opening post could be "yes".

If we disregard the exemptions, then there appears to be an unwritten size test. We might ask how the average HMRC inspector would behave with his own children. 

An ordinary parent on having his gutters cleaned could say to the gutterman, "While you are cleaning my gutters, could you pop round to my son's house and I'll pay you for both". The parent pays £250 in total by credit card. That might be the sort of thing that a parent would do and think no more about it. But would the HMRC tax inspector do this for his son and make appropriate records?

However, when the amounts become larger, e.g. I pay a builder £5,000 to work at my son's house, that appears to cross the line. 

It might be the case that all of the little things that ordinary parents do to help their children fall beneath the radar, and the HMRC would not ordinarily probe. Therefore, even the child who endlessly guzzles pate de foie gras and spends thirty minutes having power showers at his parents' expense will escape taxation.

I think you are over estimating the amount of record keeping people do. Certainly the amount they keep more than a year.  Rather than worrying about the power shower (arguable it’s a benefit to the parent not to have a stinky child visit!) I’m sure parents give helping hands to their kids when money is tight, without documenting anything.

Whenever we go out for a meal with our offspring we pay. Even when they offer to pay, we joke about reducing inheritance tax.

Linton

You should bear in mind the more complex and "nitty" you make your affairs the more hassle you give your executor and the cost if a solicitor is involved. I suggest you just keep declaration of gifts to the significant items.

SVaz

Obviously a gifted house deposit has to be evidenced and a paper trail established as to the origin. 

But, if I give my Daughter £5k in cash that I’ve taken out in dribs and drabs,  nobody is ever going to know. 

I paid for her new front and back doors, straight to the company,  again, nobody checking my bank statement would be any the wiser. 

You could have your child as a card holder on your cc account for monthly spending,  again, when you pay the bill from your bank account,  nobody would know, it could all be going on fags and booze. 
If the 7 year rule for gifting IS abolished as per the rumours, people will get even more sneaky/creative. 

sheramber

Sterlingtimes said:

[Deleted User] said:

Let's pretend that your executors want to do a really good job and go through everything with a fine-tooth comb.   And mum/dad don't want to embarress the executors and so preserve fantastically good records.

Thank you, [Deleted User]. You have been generous with your time, and I am grateful. You do not live up to your name because you have considerably simplified matters in providing your model with illustrations. The answer then to many of my questions in my opening post could be "yes".

If we disregard the exemptions, then there appears to be an unwritten size test. We might ask how the average HMRC inspector would behave with his own children. 

An ordinary parent on having his gutters cleaned could say to the gutterman, "While you are cleaning my gutters, could you pop round to my son's house and I'll pay you for both". The parent pays £250 in total by credit card. That might be the sort of thing that a parent would do and think no more about it. But would the HMRC tax inspector do this for his son and make appropriate records?

However, when the amounts become larger, e.g. I pay a builder £5,000 to work at my son's house, that appears to cross the line. 

It might be the case that all of the little things that ordinary parents do to help their children fall beneath the radar, and the HMRC would not ordinarily probe. Therefore, even the child who endlessly guzzles pate de foie gras and spends thirty minutes having power showers at his parents' expense will escape taxation.

Would the average tax inspector be liable for IHT?

Albermarle

sheramber said:

Sterlingtimes said:

[Deleted User] said:

Let's pretend that your executors want to do a really good job and go through everything with a fine-tooth comb.   And mum/dad don't want to embarress the executors and so preserve fantastically good records.

Thank you, [Deleted User]. You have been generous with your time, and I am grateful. You do not live up to your name because you have considerably simplified matters in providing your model with illustrations. The answer then to many of my questions in my opening post could be "yes".

If we disregard the exemptions, then there appears to be an unwritten size test. We might ask how the average HMRC inspector would behave with his own children. 

An ordinary parent on having his gutters cleaned could say to the gutterman, "While you are cleaning my gutters, could you pop round to my son's house and I'll pay you for both". The parent pays £250 in total by credit card. That might be the sort of thing that a parent would do and think no more about it. But would the HMRC tax inspector do this for his son and make appropriate records?

However, when the amounts become larger, e.g. I pay a builder £5,000 to work at my son's house, that appears to cross the line. 

It might be the case that all of the little things that ordinary parents do to help their children fall beneath the radar, and the HMRC would not ordinarily probe. Therefore, even the child who endlessly guzzles pate de foie gras and spends thirty minutes having power showers at his parents' expense will escape taxation.

Would the average tax inspector be liable for IHT?

If they were, then I would hope they would know enough to reduce the bill as much as possible !

Sterlingtimes

Albermarle said:

sheramber said:

Would the average tax inspector be liable for IHT?

If they were, then I would hope they would know enough to reduce the bill as much as possible !

I do not believe this. If HMRC senior executives, judges, MPs, chancellors or prime ministers paid for the children's meals out, they would rush home to fill in their IHT spreadsheets.    

sheramber

Sterlingtimes said:

Albermarle said:

sheramber said:

Would the average tax inspector be liable for IHT?

If they were, then I would hope they would know enough to reduce the bill as much as possible !

I do not believe this. If HMRC senior executives, judges, MPs, chancellors or prime ministers paid for the children's meals out, they would rush home to fill in their IHT spreadsheets.    

They would know enough to reduce their IHT liability, not the bill for the meal.