Urgent - IHT Gift and Return

[gusmac26]

Hi,

I would like to ask a question about Potential Exempt Transfer in relation to IHT. The scenario is as follows (the figure are made up, but the principle is intact).

(1) My father gifted me £750k Property 1st Jan.
(2) I then returned to him £500k cash 1st March
(3) He then gifted £250k to each of my two brothers

What are the implications regarding IHT - on the assumption that his estate exceeds the £325k tax free amount? Are all three brothers equally liable for £250k of IHT for the next 7 years?

Thanks

A

[someone]

I don't think so.

If all the gifts really are gifts then your father has made 1250K in gifts if he dies. And you have made 500K in gifts if you die.

I would be suspicious that the gift to you wasn't really a gift at all but a sale at undervalue - therefore I think SDLT would be due by you but your father would only have made 750K of gifts.

IANAA

[someone]

To add: I don't think the gifts are equal - the one to you will fall entirely within the 325k as it was made first. Don't know about the other gifts.

[gusmac26]

Thanks. Basically, my father has a property and would like to gift each son a share.

I would like to keep the property and my brothers would like the cash. If the property is gifted to me 100% then there is no SDLT due. Then I am planning to mortgage the property and raise the funds to sort out my brothers.

My thinking was that if I gift the money back to my father and he makes the gift to my brothers then no SDLT would be due in the transaction and everyone would be equally liable on IHT.

Re the point on £325k tax free band - his estate is exceeds this outside of this property, therefore I expect that the £325 would not apply to any of these gifts.

How is best to structure this transaction? Surely this is not a new problem? Any help would be much appreciated.

[someone]

I can't help you other than to suggest you read the 'can you reverse a gift' stuff posted very recently and then suggest you get professional help.

[AnthonyR]

Has this transaction actually happened? There are potentially quite substantial IHT, CGT and SDLT implications here. In any case you should probably seek professional advice to ensure that there are not significant unexpected tax charges.

In particular, have you considered the CGT implications - the gift is treated as a sale at market value, which will trigger CGT on the growth to date. Assuming he bought it some time ago there could be tens if not hundreds of thousands in CGT crystallising on the gift. Does you father have the cash to pay the tax?