Get Round The Tax Man?

[Jennykenny]

I want to give £10,000 to a close member of my family, (needed for house repairs).
Is there any way I can do this without tax having to be paid on it?
Can I set it up as a loan? (Perhaps to be paid from their estate? I don't want it back, but would that be a solution?)

[hc4361]

Is it inheritance tax that worries you?

[Dogsbody2]

You misunderstand the rules. You can give what you like, and there is no tax to pay at the giving date.
The issue that MAY arise later is one of IHT on your estate; if you were to die within the next 7 years, the gift would need to be added to the value of the estate you left, which may increase the amount of IHT your executors would have to pay from your estate.
There is a tapering effect, so the proportion of the £10k isn't constant until you survive the full seven years, and in any event the value of the estate you have may be well under the £325k threshold, under which no IHT is due anyway.

[Peter Pedant]

just give it

it is not income so they dont have to declare it

it is a gift and if you are very well heeled will count sgainst your IHT allowance for the next 7 y
but you are not feeling mortal are you ?

[ubasses]

You can give the money as a lifetime gift there will be no tax to be paid by your relative if you live 7 years, if you die before that there will be tax to be paid from your estate which will reduce for each year you are alive. If your Estate is under the IHT limit there will be no Tax.

If you set it up as a loan which you want to be repaid, it will be a good idea to draw up a loan agreement as you will have to pay tax on any interest received. This would prove to the tax man that the capital repayment was not income.

If you are happy to wait until the relative dies, the loan agreement will serve as a document to prove you hold a debt against the estate to the Executors. Or if they are very close they could just leave you that amount in their Will. You are then relying on them to have enough funds at death to repay you and there is the risk they could change their Will without your knowledge.

[Peter Pedant]

dogz the taper is not on the capital sum but on the tax rate for that erm aliquot so long as it exceeds £325k

[Peter Pedant]

and all this is not getting around the tax man
or getting one on him

it is all quite pukka and takes into account current revenue law

[Dogsbody2]

No Peter, the taper applies to the time. Three years after the gift any liability falls to £8k in this example, then £6k after 4 years and so on.

[Jennykenny]

Thank you everyone. Will just go ahead and do it. (Only difficulty is getting the person to accept it.)

[BRIGHT SPARK]

The IHT limit from 2020 is £1,000,000 per couple :-)...or £500,000 each.

[fiction-factory]

Yes, it is due to be, Bright Spark- sort of (but only in certain situations taking account of a property.)

[Davemano]

Surely if you just give it to them who is to know where it came from. It is no different to having spent it yourself.

[Peter Pedant]

No Dogz the time taper applies to the tax rate
and not the capital sum

so if there is a tax charge on a gift of £100k remembering there may not be then it is taxed at 40% if given in the first two years 32% between years 2 and 4, 24% .....

so that the tax is tapered and not the capital sum

I know - I have screwed this up in my own will .....

[fiction-factory]

I agree, Davemano- although I think it's likely that this query has nothing to do with IHT and is based on the common misunderstanding that the giver or receiver of any cash gift is liable for tax on the money given.

[Peter Pedant]

.

http://penguintaxplanning.co.uk/misconception-around-gifts-taper-relief/

is a goodsite and also lays down the law on serial giving

[fiction-factory]

Why not offer it as a loan to be paid back in any way over any period to suit him/her. Tis suggestion has nothing to do with the issue/non-issue of possible IHT tax- it's just a way perhaps of him taking the money without affecting his pride too much

[Davemano]

Further to my previous, I regularly give reasonably large amounts to family members and there never has, and never will be any record of the transactions. As I said, I could have spent it myself.

[Dogsbody2]

Peter P, your explanation above does not appear to correspond to this:
http://www.hmrc.gov.uk/manuals/ihtmanual/ihtm14612.htm
Discuss? - though it's a moot point in relation to the original question.

[Skyline D]

Peter's answer is completely consistent with your link Dogs. I just don't think you are reading it correctly. He's right technically, it is the tax rate which tapers off not the capital sum but in practice basic arithmetic tells you it leads to the same sum. If there are two numbers being multiplied and one of them is changed to 80% of the previous figure then the answer will be the same regardless of which figure is reduced to 80%.

[dancecaller]

I think there is a difference. If you give away MORE the £350,000 and live 5 years (say) then the rate payable is tapered. But if you have more than £350,000 but can't afford to give away more than £100,000 (say) then if you die within 7 yrs that £100,000 is taken from your allowance.
One rule for the rich, another for those in the middle