Gifting an 8 year old car to one of the children and IHT

UnsureAboutthis

My BiL/Wife's brother is getting a brand new car due for delivery next week.
His old car, he reckons is worth 11k trade, retail 14k.
He bought the car brand new.
He has used his annual tax exemption for gifts every year for the last ten years or so
he is 72 years old and his wife is a few years older than him.

He asked me if the taxman could take an interest  (find out) in the car/gift to one of his children if he went to Hevan by the 7-year gifts rule. (He is buying another car a smaller one for 32k cash)

400ixl

Is his estate going to be above the IHT limits ignoring the car. If not then not a consideration. If yes, probably a drop in the ocean.

Sarahspangles

UnsureAboutthis said:

My BiL/Wife's brother is getting a brand new car due for delivery next week.
His old car, he reckons is worth 11k trade, retail 14k.
He bought the car brand new.
He has used his annual tax exemption for gifts every year for the last ten years or so
he is 72 years old and his wife is a few years older than him.

He asked me if the taxman could take an interest  (find out) in the car/gift to one of his children if he went to Hevan by the 7-year gifts rule. (He is buying another car a smaller one for 32k cash)

Is your friend and his wife’s joint estate including property likely to be worth over £1 million? There’s an urban myth that there’s a limit on gifts that affects everyine, but it applies to the very small proportion of people whose estates will pay inheritance tax and then only because the amounts gifted have to be taken into account as part of their estate.

Bookworm105

UnsureAboutthis said:

He asked me if the taxman could take an interest  (find out) 

depends if his inheritors (presumably his offspring) and/or the solicitor processing the estate tax return are crooked or not

also depends if a tax return is required in the first place 

UnsureAboutthis

It's no "myth" as to where they live and what they've done to their home it's easily worth a million plus  and a few years ago they bought a cheap flat  (cash paid) for rental income so they can afford to retire at/about 63/65. This year for the 2nd time they intend to gift several thousand each to their children judging by what he said.

We have friends living in Fulham London, almost every house is worth at least a million  ie the ordinary-looking rows of terraced housing and they have like many others spent tens of thousands doing their homes up/extending etc so their children can live with them or rent out part of it to earn them income for retirement. So it is certainly no "myth" as more and more ordinary working people are caught in this trap.

I told them to consult a specialist financial advisor and/or speak to their bank first as they have one of these bank debit cards that entitles them to free financial advice.

Sarahspangles

UnsureAboutthis said:

It's no "myth" as to where they live and what they've done to their home it's easily worth a million plus  and a few years ago they bought a cheap flat  (cash paid) for rental income so they can afford to retire at/about 63/65. This year for the 2nd time they intend to gift several thousand each to their children judging by what he said.

We have friends living in Fulham London, almost every house is worth at least a million  ie the ordinary-looking rows of terraced housing and they have like many others spent tens of thousands doing their homes up/extending etc so their children can live with them or rent out part of it to earn them income for retirement. So it is certainly no "myth" as more and more ordinary working people are caught in this trap.

I told them to consult a specialist financial advisor and/or speak to their bank first as they have one of these bank debit cards that entitles them to free financial advice.

If they are in the < 5% (a very high proportion of which are in London and South East) then it’s worth them learning about ‘normal expenditure out of income’ which is a way to lift the limits on gifts. I understand you need very good record keeping for your heirs to use to substantiate this. It probably wouldn’t cover a car but I expect there’s a way to achieve the same effect by gifting money and selling the car….

Beeblebr0x

How would the taxman ever find out if you've disposed of a car on the quiet?

silvercar

Beeblebr0x said:

How would the taxman ever find out if you've disposed of a car on the quiet?

We do tend to advocate honest behaviour on the forum.

This is one of those cases where selling the car at a cheap rate, will have an incoming payment to the deceased, but giving it away has no evidence.