The Lemon Fool

Many thanks to all those who responded. Taxing in more ways than one, especially if one has brain fog. Up to this year, I have been able to live on quite a lot less than my income (and have been making some gifts out of this; I presume paying school fees counts as gifting) but with an annuity whose rate was fixed over 20 years ago,in addition to state pension + SERPS, reduction in dividend income and value, reduction of tax allowances and rampant inflation, It remains to be seen to what extent that continues. I do have index linked NS&I certificates which compensate, but one can't access the indexation cash without cashing in the certificates and no doubt it would be counted as capital gain rather than income, albeit tax free. I shall tell my children/exors. to argue about premium bond prizes on principle. They are paid into my current acct. as and when they arise and have hitherto provided only a miserable income which has not been invested.

Fortunately, most of the grandchildren's shares were gifted over 7 years ago; unfortunately, most are worth less than they were when gifted. There will be quite a bit of IHT to pay, largely due to house price increases, but I can't see what I can do about that now. Tant pis!

Bouleversee wrote:have been making some gifts out of this; I presume paying school fees counts as gifting)

I have wondered about this. I document my gifts of cash, shares or other assets so that my executors have a source to report gifts made in the prior 7 years. Gifts that have aged more than 7 years are dropped from the list.

But random acts of generosity are not on my list. I would find it odd and petty to include buying one of my kids a dinner here, a beer there, or paying the odd bill for him. If I take one of them on a trip, I do not include that either.

So it is left to my executors to decide what to include. If they want to spend days and weeks combing through 7 years worth of bank and credit card statements querying each item, then that is fine too. Or they can just use my list.

Lootman wrote:

Bouleversee wrote:have been making some gifts out of this; I presume paying school fees counts as gifting)

I have wondered about this. I document my gifts of cash, shares or other assets so that my executors have a source to report gifts made in the prior 7 years. Gifts that have aged more than 7 years are dropped from the list.

But random acts of generosity are not on my list. I would find it odd and petty to include buying one of my kids a dinner here, a beer there, or paying the odd bill for him. If I take one of them on a trip, I do not include that either.

So it is left to my executors to decide what to include. If they want to spend days and weeks combing through 7 years worth of bank and credit card statements querying each item, then that is fine too. Or they can just use my list.

From what I read, HMRC takes a much softer approach to transaction between parents and children.

Unless it's to sell a mansion to pay for renovations to Windsor Castle etc. ... or not.

Our youngest had learning difficulties and finally found his future career in computer coding - which I do not understand at all! My wife and I already agreed that we will help him as much as we can. Unlike his brother, he's quite savvy with money, if not rather tight-fisted.

As far as I'm concerned, we will buy our kids what we bloody well want, and it's nobody's business but ours!

Steve

Bouleversee wrote: Fortunately, most of the grandchildren's shares were gifted over 7 years ago; unfortunately, most are worth less than they were when gifted. There will be quite a bit of IHT to pay, largely due to house price increases, but I can't see what I can do about that now. Tant pis!

Take out a big mortgage and blow the cash on wild living? That would cut the IHT bill

ps if you gave shares and they are worth less when you die than at the time of the gift, I think you can use the lower value as the PET amount for IHT purposes

I put a question into my search engine about tax position if grandparents paid for school fees and it came up with this:
https://citywire.com/new-model-adviser/ ... ht/a631692
Confusing and contradictory or is it just me being thick?
Edit: It dates from 2012 but I don't think there has been any change in the principle since then.

scrumpyjack wrote:

Bouleversee wrote: Fortunately, most of the grandchildren's shares were gifted over 7 years ago; unfortunately, most are worth less than they were when gifted. There will be quite a bit of IHT to pay, largely due to house price increases, but I can't see what I can do about that now. Tant pis!

Take out a big mortgage and blow the cash on wild living? That would cut the IHT bill

ps if you gave shares and they are worth less when you die than at the time of the gift, I think you can use the lower value as the PET amount for IHT purposes

Too busy trying to get my affairs in order and my house in a fit state to put on the market for wild living and I could just sell a few of my shares for that otherwise.

I'm hoping the grandkids' shares will have recovered by the time I pop my clogs but at least there should be no cgt to pay if moved to ISAs in the immediate future, assuming the parents can find time to do all the transfers.
Am I right in thinking transfer forms are standard or does one have to use the one on the appropriate registrar's website?

They're standard CREST forms but if you are using someone like HL they will send you completed ones to sign I think.

I was thinking about the first stage, i.e. transferring the certificated shares held in bare trusts by the trustees to the grandchild, now adult. The platform where the grandchild's account is held wouldn't have any details of the certificated shares at that point but the grandchild could ask the platform (in this case, regrettably, ii) for Crest forms for the 2nd stage, ie transferring the shares to their dealing account.

Bouleversee wrote:I was thinking about the first stage, i.e. transferring the certificated shares held in bare trusts by the trustees to the grandchild, now adult. The platform where the grandchild's account is held wouldn't have any details of the certificated shares at that point but the grandchild could ask the platform (in this case, regrettably, ii) for Crest forms for the 2nd stage, ie transferring the shares to their dealing account.

You could ask the platform the grandchildren use whether they can accept certificated shares registered in a bare trustee's name and put them in the grandchild's account. They may say you have to send the share certificate with a transfer form into the grandchild's name to the registrar who will then issue a new share certificate to the grandchild. It was a long time ago but I think that is what I had to do. Make sure you tick the right boxes on the transfer form so no one tries to charge stamp duty!

Yes, that is what they are going to do and I had already told them to put NIL in the appropriate box. Unfortunately my daughter's printer has broken down and she is off to Barcelona on business tomorrow so I thought I would print some off for her. I wondered if the forms were standard wording. Don't worry, I'll go on a couple of registrars' websites and check them out myself.

Nobody has mentioned the IHT taper relief

40% if you die within 3 years
32% if you die between 3 and 4 years
24% 4 to 5 years
16% 5 to 6 years
8% 6 to 7 years
0% thereafter

Or does that not still apply?

<rant>

All seems like a tax on ignorance and inciting dishonesty (UK style/culture). When taxes are fairer that promotes honesty (US style/culture). Doc gives someone 6 months to live, they calculate that they're £250K over the IHT allowance so draw and stash that as cash that their heirs don't declare and who spend it piecemeal/discreetly, £100K tax evaded - crime as incited by the state pays. Or its transferred via betting or other suchlike dodgy means. Which in turn induces greater monitoring of all as evasion detection methods such that when Joe-Honest goes to make a £6K withdrawal to pay for whatever the bank staff call the Police in and they're taken in for questioning along with a follow up investigation that makes them feel like a criminal.

HRMC letters follow along those lines also. Payment demands are aggressive right from the start, pay within 14 days ... or else (the couple I've had were paid (by phone/debit card) the same day as receiving the letter, that had letter and post dates of over a week apart such that the actual payment was expected within less than a week from the date of actually receiving the letter. If that coincided with just having left to go on holidays for a couple of weeks I guess you might come back to having had the bailiffs in with all of the additional penalties/fees that may involve, owed £20, Court fees £300, bailiffs fee £500, penalty of £200, total cost £1020 ... type elevation (made-up figures, no idea of the actual amounts) of a small amount to a large amount.

Phone HMRC to make a query and you're kept waiting for 40 minutes before being cut off and having to re-dial and wait another 40 minutes again, whilst the recorded announcement repeats that abuse of call-staff will not be tolerated (and no apology from them for having kept you waiting so long when you do finally get through).

More recently I've overpaid tax, around £4K too much, but after phoning in looking for that to be repaid to me I've been told to write in including all of the details, and apparently it can take a year or more before they get around to replying!

Perhaps tax evaders are less bothered about the money and more seeking to just evade all of the bother.

Surely there must be easier/better ways. Chuck out 99.9% of the tax rule books 17,000+ pages, no income tax, no council tax, no inheritance tax, just tax on spending alone perhaps, the more you spend the you pay.

</rant>

Lootman wrote:

Bouleversee wrote:have been making some gifts out of this; I presume paying school fees counts as gifting)

I have wondered about this. I document my gifts of cash, shares or other assets so that my executors have a source to report gifts made in the prior 7 years. Gifts that have aged more than 7 years are dropped from the list.

But random acts of generosity are not on my list. I would find it odd and petty to include buying one of my kids a dinner here, a beer there, or paying the odd bill for him. If I take one of them on a trip, I do not include that either.

So it is left to my executors to decide what to include. If they want to spend days and weeks combing through 7 years worth of bank and credit card statements querying each item, then that is fine too. Or they can just use my list.

We all do that and surely for most of us the expenditure is coming out of our ordinary income and so there is no question of these expenses being a gift involving IHT or a PET.

Dod

Dod101 wrote:

Lootman wrote: I have wondered about this. I document my gifts of cash, shares or other assets so that my executors have a source to report gifts made in the prior 7 years. Gifts that have aged more than 7 years are dropped from the list.

But random acts of generosity are not on my list. I would find it odd and petty to include buying one of my kids a dinner here, a beer there, or paying the odd bill for him. If I take one of them on a trip, I do not include that either.

So it is left to my executors to decide what to include. If they want to spend days and weeks combing through 7 years worth of bank and credit card statements querying each item, then that is fine too. Or they can just use my list.

We all do that and surely for most of us the expenditure is coming out of our ordinary income and so there is no question of these expenses being a gift involving IHT or a PET.

That is my assumption also. I just don't know that it is formally written anywhere. The distinction I make is that a gift is a direct transfer of an asset from A to B. But A paying for something for B is not a gift.

Lootman wrote: . . . The distinction I make is that a gift is a direct transfer of an asset from A to B. But A paying for something for B is not a gift.

I suspect it's a bit more subtle than that. If I fancy an old master costing £23mill and you decide to pay for it for me, I imagine the taxman would be interested if you died within 7 years.

Gersemi wrote:

Lootman wrote: . . . The distinction I make is that a gift is a direct transfer of an asset from A to B. But A paying for something for B is not a gift.

I suspect it's a bit more subtle than that. If I fancy an old master costing £23mill and you decide to pay for it for me, I imagine the taxman would be interested if you died within 7 years.

Of course but that is not the sort of thing we are talking about as you well know I am sure. No. The point is that it is a bit more subtle and nuanced than in your example.

Dod

1nvest wrote:Nobody has mentioned the IHT taper relief

40% if you die within 3 years
32% if you die between 3 and 4 years
24% 4 to 5 years
16% 5 to 6 years
8% 6 to 7 years
0% thereafter

Bear in mind that this is only really of benefit (as far as I have recently discovered) when you have gifted more than the tax free threshold, currently £325,000. If you gift less than that figure you'll have to carry on living for the full 7 years.

Laughton wrote:

1nvest wrote:Nobody has mentioned the IHT taper relief

40% if you die within 3 years
32% if you die between 3 and 4 years
24% 4 to 5 years
16% 5 to 6 years
8% 6 to 7 years
0% thereafter

Bear in mind that this is only really of benefit (as far as I have recently discovered) when you have gifted more than the tax free threshold, currently £325,000. If you gift less than that figure you'll have to carry on living for the full 7 years.

I wasn't aware of that. Thanks. Do you know if that applies to total gifted amount (to different individuals) or must it be >£325,000 to each individual? £200K to son, £200K to daughter, £400K total gifted so taper relief applies, or must both son and daughter have been gifted £325K+ each.

It's the total amount. Also, it's not as though taper relief doesn't apply if you gift less than £325k, it's just that lifetime transfers are assessed for IHT before looking at the rest of the estate and so use up the nil rate band first.

eg someone with just the standard NRB has £500k when they die. IHT = 40% of (£500k - £325k) = £70k.

If instead they gifted £100k just under 7 years before they died then that gift falls within the NRB so there's no tax on it. For the rest of the estate, there is now only £225k of the NRB left so IHT = 40% of (£400k - £225k) = £70k.

Finally, if they had gifted £400k just under 7 years before death then that gift uses up the full £325k NRB leaving £75k of the gift to be taxed at the taper rate of 8% = £6k IHT. Then for the rest of the estate, there's no NRB left so IHT is 40% of £100k = £40k and the total IHT bill is £46k.

[At least that's how I think it works!]

Don’t forget that “gifts out of income” are exempt from IHT. So as well as documenting all gifts you would need to record your “surplus” income for the year as well. I suspect this would be VERY hard for HMRC to challenge. As there is no other tax requirement to measure “normal” expenditure.

Gryff

Also, it's not as though taper relief doesn't apply if you gift less than £325k

As I understand it and as per your examples, that's exactly what it does mean.

Laughton (1year and 9 months still to go)