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    • ConsumerWarrior
    • By ConsumerWarrior 14th Feb 18, 4:26 PM
    • 67Posts
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    ConsumerWarrior
    Inheritance Tax Gift
    • #1
    • 14th Feb 18, 4:26 PM
    Inheritance Tax Gift 14th Feb 18 at 4:26 PM
    If I were to pay for an expensive holiday for a daughter/son, would this be regarded as a gift thus affecting the £3000pa IHT allowance to that child?
Page 1
    • getmore4less
    • By getmore4less 14th Feb 18, 4:33 PM
    • 32,035 Posts
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    getmore4less
    • #2
    • 14th Feb 18, 4:33 PM
    • #2
    • 14th Feb 18, 4:33 PM
    There is no tax on gifts, if not exempt for any reason they become a PET on your estate.
    • Keep pedalling
    • By Keep pedalling 14th Feb 18, 5:26 PM
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    Keep pedalling
    • #3
    • 14th Feb 18, 5:26 PM
    • #3
    • 14th Feb 18, 5:26 PM
    The £3000, is an exception allowance, which simply means gifts up to that level can be excluded from your estate with emmediate effect. This does not stop you giving more away but anything over that become potentially exemp as it will not leave your estate for 7 years.

    All this only matters if your net worth takes you into IHT territory.
    • xylophone
    • By xylophone 14th Feb 18, 9:55 PM
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    xylophone
    • #4
    • 14th Feb 18, 9:55 PM
    • #4
    • 14th Feb 18, 9:55 PM
    I'm not sure that the OP's paying the travel agent for the holiday would count under the IHT rules.

    It is not a cash gift passing to the offspring and can hardly be counted as a possession?

    It cannot be passed on or sold - if cancelled, the money would be returned to the OP not his offspring?
    • noh
    • By noh 14th Feb 18, 10:38 PM
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    noh
    • #5
    • 14th Feb 18, 10:38 PM
    • #5
    • 14th Feb 18, 10:38 PM
    I believe a holiday would would count as a gift.

    From https://www.gov.uk/inheritance-tax/gifts

    "What counts as a gift
    A gift can be:

    anything that has a value, such as money, property, possessions
    a loss in value when somethingís transferred, for example if you sell your house to your child for less than itís worth, the difference in value counts as a gift"
    • xylophone
    • By xylophone 14th Feb 18, 11:16 PM
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    xylophone
    • #6
    • 14th Feb 18, 11:16 PM
    • #6
    • 14th Feb 18, 11:16 PM
    I believe a holiday would would count as a gift.
    If the OP bought top price tickets for a night at the opera and took his child (or indeed anybody else along), would that be a gift for IHT purposes?
    • Tom99
    • By Tom99 14th Feb 18, 11:45 PM
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    Tom99
    • #7
    • 14th Feb 18, 11:45 PM
    • #7
    • 14th Feb 18, 11:45 PM
    If the OP bought top price tickets for a night at the opera and took his child (or indeed anybody else along), would that be a gift for IHT purposes?
    Originally posted by xylophone
    I would say yes, its a gift.
    • Keep pedalling
    • By Keep pedalling 15th Feb 18, 12:22 AM
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    Keep pedalling
    • #8
    • 15th Feb 18, 12:22 AM
    • #8
    • 15th Feb 18, 12:22 AM
    If the OP bought top price tickets for a night at the opera and took his child (or indeed anybody else along), would that be a gift for IHT purposes?
    Originally posted by xylophone
    Where the line is crossed does nor seem to be documented anywhere. We often hire out a hous3vor Villa with spare bedrooms, so we invite family and friends to join us, but I donít add those to our gift list.

    We have also picked up the tab for days out with the family and that does not go down either. If I paid for a holiday without going myself then I would simply handover the cash for them to sort out myself, so I would definitely add that.
    • getmore4less
    • By getmore4less 15th Feb 18, 1:06 AM
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    getmore4less
    • #9
    • 15th Feb 18, 1:06 AM
    • #9
    • 15th Feb 18, 1:06 AM
    Buy a pint for someone down the pub it's a gift.

    most people ignore the small stuff as much will fit into the £250pp exemption and can also fall into regular gifts from income.
    It can add up if you are buying dinners every week for mum and dad and don't have the income to support the spends.

    There are exceptions where you are paying for stuff for a dependent so that will include children before they are treated as independent adults and can also include others like the elderly.


    In the real world there will be loads of gifts that fall through the IHT net as executors just won't be able to find them unless documented.
    Last edited by getmore4less; 15-02-2018 at 8:16 AM.
    • kidmugsy
    • By kidmugsy 15th Feb 18, 1:53 AM
    • 10,562 Posts
    • 7,233 Thanks
    kidmugsy
    If I were to pay for an expensive holiday for a daughter/son, would this be regarded as a gift thus affecting the £3000pa IHT allowance to that child?
    Originally posted by ConsumerWarrior
    It would be a gift. But if you were to go on the holiday with them it might be different. Whenever I see a three-generation family on holiday together I think "Grandpa is getting his 40% discount".
    Free the dunston one next time too.
    • Sea Shell
    • By Sea Shell 15th Feb 18, 6:56 AM
    • 723 Posts
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    Sea Shell
    In the real world though, if you've paid a £6000 bill to TUI for a holiday, say 2 years ago. Who is realistically going to dig into this to the level of who was travelling on that holiday, and are TUI obliged to give out customer information like that.

    I suppose if HMRC wanted to make an "example" of someone, who may/maynot be in IHT territory then they could dig, dig, dig....but really???

    I've yet to read on here from anyone, who has been pulled up by HMRC about a gift not declared for IHT purposes that they've since been found out on. Anyone got any?
    " That pound I saved yesterday, is a pound I don't have to earn tomorrow "
    • Keep pedalling
    • By Keep pedalling 15th Feb 18, 10:14 AM
    • 4,995 Posts
    • 5,559 Thanks
    Keep pedalling
    In the real world though, if you've paid a £6000 bill to TUI for a holiday, say 2 years ago. Who is realistically going to dig into this to the level of who was travelling on that holiday, and are TUI obliged to give out customer information like that.

    I suppose if HMRC wanted to make an "example" of someone, who may/maynot be in IHT territory then they could dig, dig, dig....but really???

    I've yet to read on here from anyone, who has been pulled up by HMRC about a gift not declared for IHT purposes that they've since been found out on. Anyone got any?
    Originally posted by Sea Shell
    It is very much a self monitored tax, and in reality the only transactions that can be traced are financial gifts through your bank accounts, setting up of trusts and transfer of land or houses.
    • Linton
    • By Linton 15th Feb 18, 10:49 AM
    • 9,387 Posts
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    Linton
    I think you will find that a lot of tax matters like this are ill defined legally - as soon as you have things expressed in minute detail you start to get clever loop-holes. There is no point in worrying too much about minor details. If you behave in a way you consider reasonable then probably everyone will be happy. Once it beomes a serious matter of disputed tax evasion/avoidance HMRC can take the issue to court at great expense to everyone concerned and the judge will give a ruling.
    • GauisScotius
    • By GauisScotius 15th Feb 18, 8:55 PM
    • 8 Posts
    • 1 Thanks
    GauisScotius
    IHT Gifts
    First, remember that IHT is not about inheritance, it is a tax that arises on transfer of value, whether you are alive or dead. On death, the tax is applied to the total value of your estate (above the IHT threshold, currently £325,000 per person) because there is a transfer of value from you to those who inherit. Equally, however, there is a tax on transfers made whilst you're alive; and it happens to be at a lower rate of tax.

    To minimise tax, the obvious thing to do would be to give everything just before you die, but this would deny the exchequer tax, so there are rules that say that transfers of value (gifts) made during your lifetime can be written back into your estate on death so it is fully taxed. However, it would be ridiculous to try to tax every transfer one ever made, so there are limits on time, and preposterous to tax generosity, so there are a number of exemptions.

    The first important exemption is an annual limit of (currently) £3,000. If you don't use it all one year, you can carry it forward, but only into the next year (so you can't carry it forward for decades and build a big pot). The next is for gifts made to direct decendents (children and grandchildren) on such as marriage (£5,000 and £2,500, respectively). Finally, gifts made out of income are excluded. This is anything you give away on a regular basis that does not impact your own lifestyle; so, for example, if you're lucky enough to have a pension of £40,000 p.a. but your living costs are onby £30,000, you could happily give the rest away. BUT, when your executors the exemption, they'll need to be able to demonstrate the gifts were both regular and out of income (Schedule IHT419, I think).

    Timewise, the first important date is 7 years. If a gift, no matter how large, was made more than seven years before your death its out of your estate (but beware, it may still be liable to tax at the lifetime rate if made within the preceding 7 years, i.e. 14 years before death). Any gift made in that seven year period, is a potentially exempt transfer (PET). If the PET falls within one of the exemptions, you're home and dry. If not, a sliding scale kicks, discounting the tax payable at 20% p.a. over years 3 - 7; i.e. Y1 = 0% discount, Y2 = 0%, Y3 = 20%, Y4 = 40% and so on until Y8 = 100% discount.

    On the holiday front: if you pay for someone else's holiday and then pop your clogs within 7 years, it's going to be a PET unless you do it regularly and you're not eating up savings on the gift itself. If you've run out of annual allowance, then you'll just have to pay for yourself out of savings and take the grandchildren with you on a regular basis!
    • antrobus
    • By antrobus 15th Feb 18, 9:19 PM
    • 15,613 Posts
    • 22,266 Thanks
    antrobus
    First, remember that IHT is not about inheritance, it is a tax that arises on transfer of value, whether you are alive or dead. ...
    Originally posted by GauisScotius
    Inheritance Tax is a tax on the estate (the property, money and possessions) of someone whoís died.

    https://www.gov.uk/inheritance-tax

    Transfers of values before death are only factored into the estate if they were made within 7 years of death, and are not covered by any other exemption, such as gifts out of your income etc.

    Or, practically speaking, because the deceased has somehow neglected to record the transaction as as a PET so that the executor has no knowledge of it, and it's the kind of transaction that HMRC won't identify.

    For example, a £5,138 charge for First Choice holidays on your Visa CC for somebody else's holiday. Or cash withdrawals from ATMs and brown paper envelopes.

    A lot of the sort of thing goes on, you know. I would not, of course suggest that anyone do anything of that kind, I would be tax evasion.
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