There have been many reports in the press recently about the taxation of financial gifts and the morality and legality of such gifts. Indeed our own Prime Minister has been caught up in the furore – as have many other politicians. The plain fact is that it is perfectly legal and moral to give whatever gifts you wish to whomsoever you wish – provided you are aware of the potential tax implications. These are set down by legislation which you need to be aware of.
There have also been some recent cases going through the Courts where the non-disclosure of financial gifts within 7 years of the death of the person who made the gift has given rise to penalties. This can be a very serious matter.
In many Estates of deceased persons, the taxman is often the first ‘beneficiary’ before family and friends get the rest (depending on what the Will says). High profile cases such as those involving politicians or celebrities usually hit the headlines – but there are many cases involving people who are not famous that you never hear about, which often result in large penalties for those involved. The legislation relating to lifetime giving is very clear. Gifts made within 7 years of death (other than the statutory annual allowances) must be disclosed in relation to that person’s Estate and could be subject to tax so if you want to make such gifts – especially if they are substantial amounts – please be aware of this. Of course if you are young enough and healthy enough and hope to live 7 years, then gifting is a great tax planning exercise – apart from potentially reducing any tax due on your Estate when you die, you will also be giving the benefit of the money to the next generation (if that is your plan) immediately, rather than them having to wait until you die.
Many lay Executors of Wills take on the administration of the deceased’s Estate themselves, without taking legal advice – often not realising that they have a duty to ask questions of the deceased’s family and to look for evidence of any financial gifts made within 7 years of the death – which need to be disclosed to HMRC. If something comes to light later on, they can be liable for penalties. This is a responsibility that many people do not want and would prefer to let the experts dealt with it. Solicitors experienced in dealing with Probate and its related tax consequences know what questions to ask and where to look for such information to protect their clients from such problems. There is no real substitute for sound professional advice in such matters.
As well as money, many people give away their house, or part of it, to their children or others and still continue to live in it – without realising that their Estate will bear the Inheritance Tax on the whole property, and the recipients of part of the property (who don’t live there) could be liable for Capital Gains Tax.
These are examples of very common ‘taxing’ issues, and if you are thinking of making gifts like those mentioned above – please take legal advice first to make sure it is done in the most tax efficient way to give the benefit to those you care about, rather than the taxman.
Our team at Parchment Solicitors specialise in all matters relating to Wills, Lasting Powers of Attorney, Probate and tax planning – as well as Conveyancing – so contact us first for advice.
Parchment Solicitors – Professional Legal Guidance you can count on.