IHT 403 gifts

dales1

Has anyone noticed today's article by Mike Warburton (tax expert) in the DT paper ?

He says that gift relief for 'Normal Exp out of Income' applies first, even before the Annual Exemption is claimed.

He says this, simply because this is what HMRC say in their own manual IHTM14132 (and that is indeed the case).

Now this is the exact opposite of how I have drafted my own IHT403 for decades - reasoning that the Annual Exemption is cast iron each year, whereas the Exp out of Income calcs are (in theory) open to HMRC review (and also that these EoI calcs should not be pushed towards the limit).

I did look up the IHTA1984 (ss 19 & 21) and I could see no mention of priority order of relief in there (or elsewhere).

Must I redo all my draft IHT 403s ?

Or is HMRC wrong in specifying a priority order that is non-statutory ?

Who knows !

probate_slave

I'm not a Telegraph reader but I did come across IHTM14132 a couple of days ago and wondered what difference it would make, particularly when HMRC don't ask to know about gifts under the annual exemption.

Looking at it again, the rule appears to favour the taxpayer, since all surplus income is available for NEOOI gifts. It simply clarifies that gifts made under the other exemptions are allowed to come from capital.

https://www.gov.uk/hmrc-internal-manuals/inheritance-tax-manual/ihtm14132

Keep_pedalling

That is correct, the annual £3k exemption can be from capital which does not reduce your excess income.