Gift of Cash

by **123rob** on Thu Oct 27, 2011 1:31 pm

Can you please advise me of the tax implications of the receipt of a gift of £1m. Is this taxable on the recipient or donor. Thanks

by **Generix** on Thu Oct 27, 2011 1:47 pm

123rob wrote:Can you please advise me of the tax implications of the receipt of a gift of £1m. Is this taxable on the recipient or donor. Thanks

I thought 'gifts' weren't taxable in the UK and only were caught if the donor dies within 7 years of making the gift under inheritance tax laws...

Though these weird direct taxes aren't my area of expertise. :oops:

by **123rob** on Thu Oct 27, 2011 3:04 pm

Thank you for your reply but what would the position be on recipient and donor if the donor did die within 7 years

by **Tax Champion** on Thu Oct 27, 2011 4:03 pm

If the Donor died within 7 years it would come into the Donors estate and liable to Inheritance tax. The Donor should keep a record of this so that the Executors know what was gifted and when.
There would be no tax implications on the recipient except for any earnings he/she received from it, ie if put in a bank account any interest earned from it.

by **tax_schmax** on Thu Oct 27, 2011 4:23 pm

Assuming both are UK domiciled, the estate of the donor would have a tax liability. This would be assessed upon the amount of nil rate band available and the duration between the gift and the death. The amount of the gift covered by the nil rate band will be taxed at 0% with the remainder taxed at 40%. The tax bill payable reduces over time, with 100% of the bill being payable if the donor dies within 3 years of making the gift, down to 20% of the tax bill being payable with the donor dies between 6 and 7 years after the gift.

The estate normally pays the tax, but if it is unable to do so, the recipient of the gift may be required to pay the bill instead.

by **123rob** on Thu Oct 27, 2011 4:31 pm

Thanks you for your help.

To : tax_schmax - can you please explain why and under what circumstances the recipient may be required to pay the tax. Also are there any ways this potential liability may be mitigated

by **tax_schmax** on Thu Oct 27, 2011 4:44 pm

If there are insufficient funds in the residual estate of the donor, the recipient may be required to pay the tax. The recipient could take out life assurance on the donor to cover the potential liability. The donor could also take out insurance on their own life and write this into trust for the purpose of giving the estate/beneficiaries funds to pay any IHT that may be due.

The recipient of the gift has an insurable interest in the donor, as their death could cause them a financial burden. Seems strange typing that in respect of a £1M gift!!

by **maths** on Thu Oct 27, 2011 4:57 pm

tax-schmax is incorrect.

The gift between two individuals is a PET.

Accordingly the primary liability to IHT, should the donor die within 7 years of the date of the gift, is that of the donee (ie recipient) not the estate of the deceased.