More questions about gifts 🎁

Skint_yet_Again

When is a gift not a gift?

If I go out to lunch regularly with a friend and we take it in turns to pay, is this a gift ? (From me to her / her to me)

If I go out to lunch regularly (couple of times a month) with a family member as I enjoy eating out and don’t want to go alone, but she cannot afford it so I happily pay, is this a gift?

If I pay for a hotel room for the same family member so we can go together to a family wedding (and I have my own room) is this a gift?

If she pays for petrol in her car to the wedding is this a gift (from her to me) ?

When the time comes I may be near the iht limit for a single person so I want to start recording gifts. I do not have any income at the current time so no gifts out of regular income. I will be using the gifts up to £250 exemption for other family / friends but 2 family members may use the £3000 exemption between them.

Will also be using the £5000 child wedding exemption and I read this has to be gifted before the wedding? Can anyone confirm this is correct and how long before?

Would appreciate any advice.

Keep_pedalling

Picking up the tab for alternative meals is certainly not gifting, neither is someone paying for petrol in exchange for a lift.

The period prior to a wedding is not specified, I think we made those gifts about 6 months ahead of our children’s wedding.

Technically those other things are gifts but I would only record things that were exclusive for the benefit of the person. So I would probable record the separate hotel room but not the meals.

vacheron

Not an expert, but I would certainly only be considering gifts as something which holds significant residual value.

I really don't think HMRC will be looking back at all the meals eaten by a family in the last 7 years and who paid for them. ☺️

edit: … HMRC states:

What counts as a gift

Gifts include:

• money
• household and personal goods, for example, furniture, jewellery or antiques
• a house, land or buildings
• stocks and shares listed on the London Stock Exchange
• unlisted shares you held for less than 2 years before your death

A gift can also include any money you lose when you sell something for less than it’s worth. For example, if you sell your house to your child for less than its market value, the difference in value counts as a gift.

​​Anything you leave in your will does not count as a gift but is part of your estate. Your estate is all your money, property and possessions left when you die. The value of your estate will be used to work out if Inheritance Tax needs to be paid.

Albermarle

https://forums.moneysavingexpert.com/discussion/comment/81949925#Comment_81949925

In general I would agree, but I guess there are some grey areas if the amounts involved are quite large.

Such as paying for adult child and partner and children for a month long 6 star holiday in St Tropez.

With the money they saved they could buy a new car, that would have residual value.

phlebas192

https://forums.moneysavingexpert.com/discussion/comment/81949925#Comment_81949925

Residual value is an artificial distinction. Gifting someone a £10k car has no inherent difference to gifting them a £10k holiday. What counts is whether there has been a transfer of value, ie the person making the gift has reduced their assets and the person receiving it has increased their assets or received goods/services that would otherwise have reduced their assets if they had paid for it themselves.

The £250 per person exemption was designed to cover brithday / christmas presents, paying for family meals etc. Inflation has made this amount stupidly small and it should be increased. In the meantime, I very much doubt that HMRC are going to challenge an estate if the deceased paid more than £250 per person for such things. But it is something they could use if they really wanted to go after executors of an estate that were actively using questionable tactics to reduce IHT liability.

silvercar

https://forums.moneysavingexpert.com/discussion/comment/81951422#Comment_81951422

Surely birthday/ Christmas presents would be regular gifts out of income, rather than using the gifting allowance.

Paying for meals out is a grey area. We’ve occasionally dragged our young adults to a meal out, when an aging relative is in town that they need to be seen to visit, the idea of a free meal is almost a bribe to attend. They wouldn’t consider it a gift.

Keep_pedalling

https://forums.moneysavingexpert.com/discussion/comment/81951545#Comment_81951545

I treat birthday / Christmas presents as normal expenditure so are not recorded in our gift records. But again it is a grey area, gifting a book or a shirt is very different to gifting a new car but at which point in between does that difference flip?

Skint_yet_Again

https://forums.moneysavingexpert.com/discussion/comment/81951545#Comment_81951545

Surely birthday/ Christmas presents would be regular gifts out of income

Not possible for me as I don’t have any income. I’m living off equity from downsizing until my pensions start

Skint_yet_Again

I have gone through my bank statements and records, birthday/ Christmas gifts are £10-£20 pounds each with the occasional meal for most family members. So these are under £250 each & exempt

One family member has £10-20 gifts for Xmas & birthday, plus a couple of meals a month and will also have 2 nights in a hotel room in the future paid for.

Grown child has £100 birthday, £100 Christmas, one-off £100 gift, one-off gift £1000. (Plus will have £5000 for wedding in the future. Also intend to give an inheritance of £20k but this will be by deed of variation)

So as long as the two family members who go over £250 add to less than £3000 is this exempt from iht?

Wedding gift £5000 paid before the day / inheritance will be exempt?

Albermarle

https://forums.moneysavingexpert.com/discussion/comment/81951545#Comment_81951545

However if you are making regular gifts out of income, you have to keep good records as your executor will have to convince HMRC that you were really sticking by the excess regular income rules. So if you are not normally doing this it would not be sensible just to claim Xmas presents etc under this rule.

I treat birthday / Christmas presents as normal expenditure so are not recorded in our gift records. But again it is a grey area, gifting a book or a shirt is very different to gifting a new car but at which point in between does that difference flip?

Good question !

Also I suspect most people just would not think that paying for a family holiday with adult children ( for example) was some kind of gift,and would just think of it as normal expenditure/a treat.

silvercar

https://forums.moneysavingexpert.com/discussion/comment/81951801#Comment_81951801

We have good records, OH’s income includes irregular bonuses and we document the gifts as coming from these bonuses. Our general incomes well cover our living costs.