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Post Info TOPIC: P.E.T


Guru

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P.E.T


 

Hi all,

A client informed me today that he had received a gift from his elderly Father in excess of 25k (not sure as of yet if the Father has an accountant) am I right in thinking that this should be treated as a Potentially Exempt Transfer which would fall under the 7 year rule with IHT taper relief and that if the father was to pass away within the 7 years then the gift may become chargeable and my client would be liable to pay the tax if any was due.

Any advice would be much appreciated, Cheers 



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Doug

These are only my opinions of how I see things and therefore should not be taken as advice



Master Book-keeper

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Hi Doug.  From my understanding, it is the estate which is taxed, not your client.  Gifts are deducted from the tax free allowance first, so it may not even be taxable if his father dies before the 7 years are up.

Auf Wiedersehen  (sorry!)


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John 

 

 

 Any advice given is for general guidance and professional advice should be sought applicable to your circumstances.



Master Book-keeper

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Morning both. Almost there, silly season almost done - 2 days to go until you can rest.

Rest? oops I mean start the VAT deadline chaos and try to catch up with the other lurking stuff! Oh well. Keep going.

Is the gift of cash? All in one go?

Has the deal been documented in any way?

Its important to document the dates and amounts and whilst you cannot re-write history it could be that £6000 of that is under the exempted gifts option. With this you can give up to £3k per year to a child (different limits for grandchildren etc) and you can carry forward any unused annual exemption forward but only for one year (hence the £6k). That of course is just from one parent. But you need to be careful as if they have given a pile of cash at birthdays and Christmas in the same year these will count towards the exemption. The annual exemption is not added to the value of your estate.


Then there are the PETs which allow gifts of unlimited value, provided they meet certain conditions (#)

At transfer they are assumed to be exempt - so no IHT at that time.

If death occurs within 7 years hen the PET becomes a chargeable transfer, but be careful as the transfer is included in the death estate total (unlike the other one above). Until such time as the death occurs you will not know if your guy will have a tax liability or not as you will not know the value of the estate/what other gifts have been given. Unless of course you are aware that the Father had no other assets and will gain no other assets (unlikely!)

So broadly in answer to your Q - yes (but caveated re the amount, ie you cant just calculate it on £25k, as it depends on the overall value of the estate and Daddy dearest handing out gifts to others)

Is how I understand it!








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Joanne  

Fallows Hall Ltd 

Winner - Bookkeeper of the Year 2015, 2016 and 2017

Thoughts are my own/not to be regarded as official advice,which should be sought from a suitably qualified Accountant.

 



Guru

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Date:

 

Hi John & Joanne

Thanks for the replies, not got any more information as of yet but I did get the impression that it was a one off lump sum gift, client phoned me about a different matter and it was just towards the end of the call that he mentioned " oh, by the way my Dad sold a house he owned (rental) and gave me 25k there won't be any tax consequences will there?" 

I did ask if his Father had an accountant but my client was not sure, I would certainly hope that he would have sought professional advice before making these decisions not just on the gift but also on the sale of the house, I have asked if he can get his Father to ring me so I should be able to provide more information then.

Cheers

 



__________________

Doug

These are only my opinions of how I see things and therefore should not be taken as advice



Master Book-keeper

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Posts: 7644
Date:

Artois wrote:

 

I have asked if he can get his Father to ring me so I should be able to provide more information then.

Cheers

 


 Tbh I would caution you against such a course of action And would just ask the son for copies of any existing documentation to prove what the money was for.   Otherwise you could easily end up with a he said/she said type scenario, or a conflict of interest. 

There is no tax impact at this point whether it's a gift or was a loan, nor can I think of another scenario it would be taxable just now.



__________________

Joanne  

Fallows Hall Ltd 

Winner - Bookkeeper of the Year 2015, 2016 and 2017

Thoughts are my own/not to be regarded as official advice,which should be sought from a suitably qualified Accountant.

 



Guru

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Posts: 837
Date:

Cheshire wrote:
Artois wrote:

 I have asked if he can get his Father to ring me so I should be able to provide more information then. 


 Tbh I would caution you against such a course of action And would just ask the son for copies of any existing documentation to prove what the money was for.   Otherwise you could easily end up with a he said/she said type scenario, or a conflict of interest. 

There is no tax impact at this point whether it's a gift or was a loan, nor can I think of another scenario it would be taxable just now.


 Hi Joanne

Wise words of advice as usual, thanks

I had no intention of offering advice to the Father on the IHT and the giving of gifts issues as even though I touched on the subjects during previous studies I certainly do not have the expertise or experience to be giving that kind of advice hence the initial question, it was more of a case of checking that he had indeed sought professional advice himself before doing so.

I was more concerned with the sale of the property and the previous years of rental income to make sure that both had been and will be accounted for with Income Tax and CGT.

 



__________________

Doug

These are only my opinions of how I see things and therefore should not be taken as advice

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