A Valuable Inheritance Tax Relief
You may not need to wait seven years ...
POSTED BY HELEN BEAUMONT ON 06/03/2019 @ 8:00AM
There are some valuable Inheritance Tax reliefs available that may be useful if you want to make a gift without waiting for the 7-year exemption period ...
Usually, gifts would be subject to Inheritance Tax, but there are sometimes relief's available!
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One generous inheritance tax (IHT) relief is the 'normal expenditure out of income' one. It really is only limited by your personal circumstances and the amount of surplus income you have to give away.
As long as these conditions are broadly followed then you can benefit from the exception:
This all seems pretty straightforward.
In practice, everyone's circumstances vary and this means it is often difficult to determine if the exemption applies to you. HMRC are very tight in how this is implemented in line with its own interpretation of legislation and case law. But if the conditions are satisfied, there's no 7-year wait.
If you make a gift to another person (for example, to one of your children), it becomes a Potentially Exempt Transfer (PET). However, it only becomes properly exempt when the donor survives for at least 7 years. Conversely, if the exemption does apply, then there is an immediate reduction in the donor's estate value. HMRC will seek to establish whether the exemption applied if the donor dies within the 7-year time limit, especially if they think that there is Inheritance Tax due from the estate.
As an example, if a grandparent had an income sufficient to support a grandchild by giving them a certain amount each month, and they don't go without themselves, then HMRC would most probably allow it. They like to see a pattern of regular giving over a few years so gifts made on a regular basis are more likely to pass their tests rather than a one-off payment.
Good record keeping is a very important factor in claiming the normal expenditure out of income exemption. HMRC provides a useful form (IHT403) for donors in terms of helping to demonstrate that gifts were made out of their surplus income.
"Would you like to know more?"
If you'd like to find out more about this valuable Inheritance Tax relief then do give me a call on 01908 774323 or click here to ping me an email and let's see how I can help you.
Until next time ...
More about Helen Beaumont ...
Helen brings the personal tax planning experience of the top 20 tax companies to Essendon. Formerly of MacIntyre Hudson (with 45 offices nationwide), Helen worked at Chancery for more than 10 years before joining Essendon as the personal tax specialist.
Tax Planning can make a considerable difference to your tax liability. Helen has specialist knowledge and experience in tax planning and uses every opportunity to minimise your tax bill is utilised. By analysing your investments, income, profit and expenditures, Helen will provide strategic tax planning expertise that could offer significant savings, whilst delivering clear, honest advice and guidance.
When Helen is not at Essendon she spends time with her young son and likes going on long walks with the family dog.
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