More questions about gifts 🎁

silvercar

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

I would have thought that a wedding gift documented as such should be fine, whether it’s paid in the months or weeks before. Also a deed of variation on an inheritance, means it is considered as going direct from the deceased to the recipient without ever touching you, other than deprivation of asset considerations if you wanted to claim means tested benefits or had care costs.

The actual cost of the wedding is more interesting, wedding invites are often phrased as ‘Parents of X and Y invite you to celebrate the wedding of X and Y’ that reads to me that the parents are inviting, hosting and paying the bill, so there is no gifting involved. If there was gifting, a lot of the costs eg food etc would be gifts to the guests not the couple.

phlebas192

https://forums.moneysavingexpert.com/discussion/comment/81951575#Comment_81951575

This is precisely the point of the "annual exemption" and "small gift" provisions. They were set at £3k and £250 respectively in, I believe, 1984 and haven't been increased since. Allowing for inflation these would now be more like £10k and £900. At the time the limits would have covered all but the wealthiest of households. Now, they are likely breached by a significant number of taxable estates.

The real problem is that it isn't a "grey area" at all - it is explicitly defined in the 1984 Inheritance Tax Act. Gift more than £250 to an individual and it then forms part of the £3k allowance. Exceed that and it is now a potentially exempt transfer. So either you need to keep sufficient records for your exectors to be able to claim it under the normal expenditure provision (which also requires a regular pattern of gifting so cannot cover a one off gift) or else they risk penalties for submitting an incorrect estate valuation for IHT.

The reality is that this will not happen. And, as more estates become subject to IHT, we will have a scenario where individuals are regularly creating PETs without realising it, executors are not reporting them and HMRC are turning a blind eye to the issue because it is not worth the potential IHT to investigate / prosecute them.

The obvious solution is to increase the limits to a more relalistic level. I will be writing to my MP to make this point, emphasising the needless bureaucracy aspect of the current limits.

Albermarle

https://forums.moneysavingexpert.com/discussion/comment/81952255#Comment_81952255

You make a good point, but I suspect even with a £10K limit, many will just not consider some types of gifts ( such as a freebie holiday with parents) as gifts, and will never record them as such.

silvercar

The grey areas in my mind, are spends that benefit the donor as much or more than the recipient eg family gatherings paid for by the senior member of the family. If I make a family meal at home, I doubt many would call that a gift, if I take the family out for a meal, is that a gift? And what is the half way point, where I order in a take away?

Albermarle

https://forums.moneysavingexpert.com/discussion/comment/81953799#Comment_81953799

I think like most people, I would not consider taking the family out for a meal and paying, as some kind of official gift that needs recording and paying back into the estate if I die within 7 years.

That might not fit strictly with HMRC rules, but is surely the common sense approach for both me and HMRC.

I wonder if there have been any test cases in the courts . Spend Tens of Thousands on legal fees to see whether a Scampi & Chips should be counted back into an estate 😂

RAS

https://forums.moneysavingexpert.com/discussion/comment/81954738#Comment_81954738

My thoughts turn to the time an elderly relative asked me to join them for part of a self catering holiday, because I liked doing the same things as they did.

I paid my own fares and shared costs during the week but they didn't want contributions to the rent and local petrol costs. Think they felt that working out how to get the storage heaters working a more useful contribution.