The Inheritance Tax implications on lifetime gifts
Unless people are specifically making gifts as a tax planning measure they probably give little consideration to keeping a record of them or the tax consequences. But should we all be keeping a better note of the gifts that we make?
After a person’s death it is the responsibility of their Executor or Personal Representative to report to HMRC for Inheritance Tax purposes. This includes disclosing any relevant gifts made in the 7 years prior to the deceased’s death. As a result, an Executor should always make diligent enquiries into any gifting but this can often be difficult if they are not family members or if the deceased person has had different accounts within the last 7 years.
Following on from the case of CRC v Hutchings, HMRC have reminded people in their recent newsletter that there is an obligation on the recipient of a gift to declare their gift either to the Executor or HMRC. Failure to do so could lead to a penalty on the recipient of the gift for 50% of the unpaid tax which would have otherwise been payable from the deceased’s estate if declared at the time.
Such penalties are probably far from most people’s minds when they make gifts to their children for a new car or a holiday and at times of loss it can be harder for a recipient to remember whether that gift was 6 years, 11 months ago or over 7 years ago. Therefore, the easiest way for a person to prevent such a situation arising on their death, and to prevent additional stresses on their loved ones at an otherwise difficult time, is to keep a clear record of the gifts that they make and ensure that this record is accessible to their Executors.
For further advice on lifetime gifts and Inheritance Tax Planning please contact our Wills, Trusts and Probate lawyers to make an appointment. Our specialist Wills, Trusts and Probate solicitors can be contacted at any of our offices including Ringwood, Bournemouth, Poole, Swanage and London or by email.