Do I need to declare every gift my father made, for Inheritance Tax

KeepSailingForTheHorizon25

Hi all,

I am currently sorting the IHT for my father's estate.

As part of the IHT400 form, I am completing the Schedule IHT403 (Gifts, etc).

My father was fortunate enough to be able to regularly gift money to his sons, and grandsons (although this was paid into his daughter-in-law's accounts first, before being tranferred to their accounts).

There were patterns, in that he sent money for nearly every birthday, school holiday, as well as him contributing to up keep of vehicles, swimming lessons, etc. Most of these are referenced on his bank statements, but not all.

If he didn't break the £3000 + £250 (per individual) yearly threshold (plus the carry over from the previous year), do I need to declare every amount he sent, or is that deemed as not applicable?

Answering the 'easy' questions:
Yes, his estate is over the £325k + £175k threshold.
Yes, his gifts were made from surplus annual income, and not savings.

Jeremy535897

The £250 per donee exemption for outright gifts annually cannot be combined with the £3,000 exemption in respect of any one donee.
The £3,000 exemption is available annually.
The IHT 403 explains what information you need to provide for gifts that aren't covered by either of the two exemptions above.
There is a wealth of information here, and in the subsequent sections:
https://www.gov.uk/hmrc-internal-manuals/inheritance-tax-manual/ihtm14231

Keep_pedalling

KeepSailingForTheHorizon25 said:

Hi all,

I am currently sorting the IHT for my father's estate.

As part of the IHT400 form, I am completing the Schedule IHT403 (Gifts, etc).

My father was fortunate enough to be able to regularly gift money to his sons, and grandsons (although this was paid into his daughter-in-law's accounts first, before being tranferred to their accounts).

So effectively he only gifted to one person

There were patterns, in that he sent money for nearly every birthday, school holiday, as well as him contributing to up keep of vehicles, swimming lessons, etc. Most of these are referenced on his bank statements, but not all.

If he didn't break the £3000 + £250 (per individual) yearly threshold (plus the carry over from the previous year), do I need to declare every amount he sent, or is that deemed as not applicable?

As all his gifts went to one person so anything over his annual exemption needs to be declared and you are going to have to rely on the gifts from excess income exemption not the £250 small gifts exemption. 

Answering the 'easy' questions:
Yes, his estate is over the £325k + £175k threshold.
Yes, his gifts were made from surplus annual income, and not savings.

You have not given his marital status, if he was widowed then he’s estate will be able to take advantage of the transferable NRBs. If that is the case and his estate is under £650k then you may be able to avoid having to do an IHT return at all. 

Claiming gifts from surplus income requires a lot of information about his expenditure from the last 7 years. Did he leave you that or are you going to have to trawl through 7 years of bank statements?

KeepSailingForTheHorizon25

Thanks.

To clarify some bits-
He gifted to 3 people - me, my brother, daughter in law.
Most years this was below the £3000 / £250 threshold, but on a couple of years it was over. 
Question - do I need to list every gift on the IHT403, or just anything over £3k?

He was married, but a pre-nup meant neither of them had a claim on the others estate. So wife has no claim, or intention, to benefit from Estate.
Therefore his house, that he did reside in before it was rented out, is left to the beneficiaries (sons).

As his estate is over the £500k threshold - I assume any gift over the £3k limit has to be listed?

NorthYorkie

You said "My father was fortunate enough to be able to regularly gift money to his sons, and grandsons (although this was paid into his daughter-in-law's accounts first, before being transferred to their accounts)." Keep Pedalling has said "So effectively he only gifted to one person". I think however that you seem to be saying that the amounts were paid into the Daughter-in-law's account as a matter of convenience. In other words, she merely acted as a conduit to pass the gifts to the sons/grandsons. Does her account show amounts going out to the sons/grandsons which match the amounts paid in from the father?

It then gets confusing because in your last post you say "He gifted to 3 people - me, my brother, daughter in law.

I think you need to prepare a schedule of all the gifts made, showing the date, amount and recipient. This should help you in completing the IHT 403 which says " Do not tell us about any gifts where the total value was £3,000 or less in any tax year, small amounts of £250 or less or if the gifts were made to a spouse or civil partner."

You have also given the impression that some of these gifts may have been part of your father's normal expenditure and were made out of surplus income. There is an exemption for gifts which qualify as such. It can be quite complicated and various conditions are prescribed (see IHTM14231 - Lifetime transfers: normal expenditure out of income: introduction - HMRC internal manual - GOV.UK).You will see that Page 8 of IHT 403 requires detailed information in order to claim this exemption. You may wonder whether it is worth the effort in view of your comment that "Most years this was below the £3000 / £250 threshold, but on a couple of years it was over."

DRS1

KeepSailingForTheHorizon25 said:

Thanks.

To clarify some bits-
He gifted to 3 people - me, my brother, daughter in law.
Most years this was below the £3000 / £250 threshold, but on a couple of years it was over. 
Question - do I need to list every gift on the IHT403, or just anything over £3k?

He was married, but a pre-nup meant neither of them had a claim on the others estate. So wife has no claim, or intention, to benefit from Estate.
Therefore his house, that he did reside in before it was rented out, is left to the beneficiaries (sons).

As his estate is over the £500k threshold - I assume any gift over the £3k limit has to be listed?

That reads like a second marriage.

I think the point about was he widowed was referring to a previous marriage.  Of course that may have ended in divorce.