Deed of variation

Parkhouse20

My intention was always to get the ‘ advanced’  money back from the children’s deed of variation inheritance from my Dad so I should probably not have used the word ‘gifts’ in my original post. My children were aware of this when the money was transferred to them. 

mybestattempt

Parkhouse20 said:

Still not sure why paying back loaned money is fraud. The money was advanced to the children to beat the end of tax year ISA and pension deadlines. It was known they would be getting an inheritance in the near future to cover this. Are you saying that HMRC second  guess potential motives for someone using a deed of variation to pass inheritance direct to the grandchildren ? Would HMRC treat this differently then if the money had gone directly to the grandchildren in the original deceased grandfather’s will? 

You seem to be changing and expanding the narrative to prepare a version of events to possibly be given by your executor and children to HMRC after your death.

No one here can predict precisely what HMRC may check in the future but they should be told the truth; you made PETs.

Who knows what will raise their suspicions and how credible they will find the answers they are given.

Even the remote possibility of an enquiry by HMRC is not a legacy I would leave to my children.

Parkhouse20

Many thanks for your comments. Surely both a gift and a family loan not yet repaid are both PETs ? Aside from your assumptions of what my intentions were, is there no way of cancelling out a PET by the donee giving the equivalent money back to the original donor ? 

Keep_pedalling

No a loan is not a PET. Any outstanding loan on your death would be classed as a debt owed to the estate. A PET does not form part of your heritable estate, an outstanding lone does (provided it can actually be recovered)

Parkhouse20

I thought that if 7 years have not elapsed from the date of the PET then all or part of it ( subject to the appropriate tapering) go back into the donor’s estate for IHT assessment.

Keep_pedalling

Parkhouse20 said:

I thought that if 7 years have not elapsed from the date of the PET then all or part of it ( subject to the appropriate tapering) go back into the donor’s estate for IHT assessment.

It does, but it does not form part of the heritable estate. Tapering only comes in to play if you gift more than £325k. 

sheramber

 The gifts are PETs for 7 years then drops. Out off IIHT. 

If the children return the money to you it is  added to your estate and subject to  IHT w hen you die .

Are you not better leaving it as a PET  than returning it too your estate? 

NorthYorkie

Parkhouse20, you really need to go and pay for advice from a professionally qualified adviser (e.g. A Chartered Tax Adviser).If your estate is going to be liable to Inheritance Tax, then it should be worth the cost of that advice. Otherwise that advice will at least give you peace of mind.

saajan_12

Not sure what you're even aiming to do.. If your estate might be over the IHT threshold, then why do you want argue the money was a loan to your children? 
As a loan, that amount is still in your estate, so your estate WOULD pay the IHT on that amount. As a gift, if you survive 7 years then its out of your estate. 

fuzzzzy

I get what the OP means but maybe they should have set it out explicitly to their children in the form of a letter at the time.

They could have stated to their children that they were expecting to receive an inheritance from their recently deceased father which they intended to pass onto the children by way of a deed of variation. In order that the children could make use of their tax free allowances at the end of the 2024 to 2025 tax year they intended to advance them a loan which they would then expect to be repaid once the children received their grandfather's inheritance.