IHT and Normal expenditure

[PinkDalek]

Thanks PD

my original question was

This year he has had to put a new roof on his garage, the total costs was about 3-4,000, I would consider this not to be normal expenditure and as such I think he could use his savings to pay for this and then still gift the same amount to whomever he wishes. what are others views?

Paul

This discussion a while back might be of interest viewtopic.php?p=45426#p45426. It is a six page thread and covers a variety of matters and you may benefit from reading the entirety.

What I did include back then was this on a similar issue:

However, on the car purchase/capital expenditure front, I thought I'd look back at TMF. Somehow or other, I found this post by meldrewlives from 2010:

[link now broken]

It covers a conversation with the CTO and it includes:

On the expenditure side I did manage to clarify that 'one-off' non-recurring expenditure out of capital, e.g. buying a car one year, could be excluded. It was however pointed out that if one was in the habit of buying a new car every year then this becomes "normal expenditure" and should be included.

That's sufficient for my purposes, being LTB&H in so far as cars are concerned, and I will fully annotate my schedules, which are being prepared for my Executors, along those lines. They'll be using professional advice at the time, I'm sure, and should they decide that my IHT403 table is not worth a candle, that would be up to them. Having been an Executor using professional advice fairly recently, I was able to tell the solicitors, who asked the question, that I was aware of the question shown below and the IHT403 table and that it was not in point for the estate in question.

In any event, at the moment, I'm not at all convinced I can demonstrate a sufficiency of surplus income for these purposes (I'm also listing all appropriate gifts (within reason)) and will make it easier for them by telling them so.

At least my efforts will save my Executors from attempting or being tempted to recreate the position and they'll be able to see fairly clearly that the answer to the question on IHT403 of Are you claiming that gifts should be treated as exempt as 'gifts out of income'? would be a no (at least for the moment).

PD

PS The whole thread is presently here [link now broken] and, having found it, I've saved it here https://web.archive.org/web/20170412014 ... sort=whole. I've yet to study it fully, it includes some interesting comments on SIPPs, but I saw a Gordon Bennett! from someone when I mentioned the detail required for the IHT403 table.

[Bouleversee]

Like Lootman, I can't be bothered with all that either but in any case, changes may be afoot if Lord Willetts and the Resolution Foundation get their way. See article in The Times today headed "Scrap inheritance tax to boost millennials" https://www.thetimes.co.uk/article/scra ... -nz2lqj5f0. If the link doesn't work try googling the headline and don't assume this is good news. The substitute may be even worse.

I don't think one is allowed to discuss policy on this board but can't remember where one does. Perhaps someone could enlighten me.

In the meantime, can anyone tell me whether paying school fees or university expenses directly (as opposed to giving the dosh to children/grandchildren) still counts as a potentially taxable gift. I expect it does. I think the 7 yr rule and the IHT benefit of AIM shares may soon be out of the window. Time to buy shares in cruise companies etc?

[PinkDalek]

... I don't think one is allowed to discuss policy on this board but can't remember where one does. Perhaps someone could enlighten me.

Possibly Polite Discussions or The Economy including Budgets viewforum.php?f=47

I can't access the full article but what I've seen might suggest the Resolution Foundation are suggesting a receipts basis tax. Isn't there an HMRC IHT Consultation at the moment? In fact, looking here https://www.resolutionfoundation.org/me ... tance-tax/, it mentions:

Inheritance Tax Review Call for evidence and Survey Published 27 April 2018
https://www.gov.uk/government/consultat ... and-survey

In the meantime, can anyone tell me whether paying school fees or university expenses directly (as opposed to giving the dosh to children/grandchildren) still counts as a potentially taxable gift. I expect it does. I think the 7 yr rule and the IHT benefit of AIM shares may soon be out of the window. Time to buy shares in cruise companies etc?

I hold Carnival but, yes, for you at least, those payments are potentially exempt transfers, unless you wish to consider setting up a discretionary trust (and all that entails) for those purposes (which would be an IHT event but would start the 7 year clock ticking earlier, rather than you paying annually).

Random article http://citywire.co.uk/new-model-adviser ... ht/a631692 if the direct link functions.

[meldrewlives]

Regarding the question:-

"In the meantime, can anyone tell me whether paying school fees or university expenses directly (as opposed to giving the dosh to children/grandchildren) still counts as a potentially taxable gift."

The IHT rules stipulate that for something to be considered as a PET there MUST be an increase in the transferee's estate. The approach proposed above would not be consistent with that stipulation.

Edited to add: The stipulation applies to PETs but not to e.g. normal expenditure out of income.

[Bouleversee]

Thanks to Pink Dalek and Meldrewlives. The article linked by PD seems to contradict itself as regards payments of school fees etc. However, payment of school fees directly is not increasing the estates of the grandchildren so presumably they could be paid out of capital, possibly paying several years fees upfront (I believe some schools have schemes for that). I will have to find time to look it up on HMRC's website. Not enough hours in the day for everything I need to deal with.

[meldrewlives]

In case you haven't come across it, there's a useful publication at taxcafe.co.uk 'How to save inheritance tax'.

I have no connection other than as a buyer of said book.