DMC12

Suppose an elderly relative gives away a large sum of money, say £80k and then dies within 7 years. Who would have the tax liability?

1. Does the person who received the money have to pay the tax on the gift?

or

2. Does the money form part of relatives estate and inheritance tax is paid out of the estate only if the value is more that the ~£255k?

Many thanks.

Steve.

Hobo_Jojo

gifts should be free from any sort of taxes, full stop.

Tiggs

assuming the gift is the only one made in the seven years- the amount is added into the IHT calculation but has the effect of first being offset against the Nil Band. Thus if the gift was 80k the nil band is now £255-80 = £175k

Assuming the rest of the estate is over £175k then tax will be due. Now the gift has caused an increase in tax but not been subjected to tax itself (which is why you should ignore anyone thats mentions taper relife as you cant taper nothing!)

so the esate will pay not the owner of the gift.

T

Tiggs

of course if the estate is less than £175k no tax is due.

DMC12

Thanks Tiggs, much appreciated.

hoskib

iTrader: (1)

not really the same, but what if my dad bought a car and then i bought it off him for £1 (to try and spread around his estate to get it below the inheritence threshold) is this a gift?

Scooby-Doo

If the car is only worth a pound there is no problem but for tax reasons they would take market value. otherwise everyone would sell their houses to relatives for £1.

hoskib

iTrader: (1)

bugger.
another get rich quick scheme up in smoke

Tiggs

simply way to think of a gift is as loss of value to the estate...ie. if your dads give you a car worth £10 and you give him £1 then he has lost £9.....thus a £9 gift.


obviuosly dont apply to commercial transactions conducted at arms length.

T