This site uses cookies. By continuing to browse the site you are agreeing to our use of cookies. To find out more about cookies on this website and how to delete cookies, see our Cookie Policy.
Analytics

Tools which collect anonymous data to enable us to see how visitors use our site and how it performs. We use this to improve our products, services and user experience.

Essential

Tools that enable essential services and functionality, including identity verification, service continuity and site security.

Where Taxpayers and Advisers Meet

Can the tax man go after previous beneficiaries i have given to?

dvldvl2222
Posts: 14
Joined: Wed Aug 06, 2008 3:38 pm

Postby dvldvl2222 » Wed May 31, 2006 2:50 am

i know gifts are tax free for the receiver and the receiver does not owe any tax on them but;

if i gave the gift from money i had not declared, is the person who received the gift liable to return that money to the tax man ?

in my example a friend has bought a house with money i gifted them. if i now owe a lot of money to the tax man and am bankrupt, do they have any right to claim the house or take action against the gift receiver?

if no tax was paid on the monies gifted, could they argue it was not mine to give?

dvldvl2222
Posts: 14
Joined: Wed Aug 06, 2008 3:38 pm

Postby dvldvl2222 » Wed May 31, 2006 2:51 am

for the above case, note that the money was gifted years before the tax investigation.

AndyLevett
Posts: 28
Joined: Wed Aug 06, 2008 3:38 pm

Postby AndyLevett » Wed May 31, 2006 4:24 am

Gifts of cash only have tax consequences if the donor dies within the 7 years after making it or you have use of property the donee uses the cash to purchase.

If you are bankrupt your assets and creditors will be dealt with by the official receiver. Unless the gift was in anticipation of iminent bankruptcy there is no recourse for the property to be repossessed.

pallet
Posts: 49
Joined: Wed Aug 06, 2008 3:25 pm

Postby pallet » Wed May 31, 2006 4:04 pm

I think the time of the gift is needed 5 years springs to mind.

AndyLevett
Posts: 28
Joined: Wed Aug 06, 2008 3:38 pm

Postby AndyLevett » Thu Jun 01, 2006 12:32 am

Yes 5 years is correct for gifts prior to bankrupcty but if the intention was innocent, ie not to conceal assets from claimants, and you were solvent at the time and immediately after then there should not be a problem. The court would need to be satisfied that you were insolvent or trying to put assets beyond claimants' reach before taking any action which could include a custodial sentence.

As Pallet says, any gifts made more than 5 years prior to the petition are not an issue.

AndyLevett
Posts: 28
Joined: Wed Aug 06, 2008 3:38 pm

Postby AndyLevett » Thu Jun 01, 2006 12:43 am

This may be of use:-

In order to protect transactions from being set aside at the request of a trustee in bankruptcy it is necessary to take steps to prove that you were not insolvent at the time the gift was made and that there was no intention to protect assets from your creditors.

Declaration of Solvency: If bankruptcy occurs within two years, then the question of solvency at the time of the gift is not relevant. Nonetheless, even if disaster is felt to be imminent, a declaration of solvency by you, or perhaps someone such as your accountant with detailed knowledge of your finances, if necessary supported by financial details should be done; if you avoid bankruptcy within the two year period then such a declaration, made at the time of the gift, could well prove invaluable.



In the case of gifts not to associates and gifts made more than five years before the petition the burden of proof is on the person seeking to have the gift set aside, and it will become increasingly difficult for him to prove that protecting assets against creditors was the predominant motive. It is important to be able to point to some other motive as being the predominant one when wishing to protect assets.


As a practical matter, it must be preferable for correspondence with professional advisors to emphasise, if possible, that the predominant motive was not that of putting assets beyond the reach of creditors. For example, the creation of a settlement may have that motive, but if there is also the motive of protecting capital generally for future generations, and perhaps obtaining some tax advantages, then this might legitimately be the predominant consideration. If a member of Lloyd's transfers his or her home into the name of his or her spouse, in most common cases there might be little reason for doing this other than to protect the asset. Nonetheless where there are some other motives, for example tax planning reasons, these should be made full use of.


Return to “Tax Investigations and Enquiries”