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Where Taxpayers and Advisers Meet

Tax on a lottery win "gift"

John Brennand
Joined:Wed Aug 06, 2008 3:22 pm

Postby John Brennand » Tue Mar 01, 2005 1:56 am

Apologies if this has been discussed before I havent found the answer yet.

This is a semi-hypothetical discussion I am involved in.

If my mother wins £2 million on the lottery and gives me £1m - what taxes if any are due by myself ?

I think that it is counted as part of my mother's estate and therefore subject to Inheritance tax rules. Thus there would be no tax to pay if she survives for the 7 years. Others say it is a "gift" subject to a £3000 limit before tax and then CGT is paid.

Anyone help us reolve the discussion.



Joined:Wed Aug 06, 2008 3:11 pm

Postby ian.wright@beechams. » Tue Mar 01, 2005 2:18 am

It is a gift and the seven years you mention are correct, being a potentially exempt transfer.

When the gift is made, you could treat £3000 of it out of the annual exemtion or double up to £6000 if lasts years one was not used.

There is no CGT related to a gift of cash. The only taxes you would pay is on interest or gains made on the use you put the money to.

With such large amounts involved, clever tax planning could be used involving trusts.

If such monies are to transpire, can you ask your mother to help me with my lottery numbers and of course seek professional tax advice on the best course of action to mitigate any tax liability.

John Brennand
Joined:Wed Aug 06, 2008 3:22 pm

Postby John Brennand » Tue Mar 01, 2005 2:30 am

Thanks Ian.

When I said "semi-hypothetical" I meant that the win was "hypothetical" but the discussion was "real" :-)


Joined:Wed Aug 06, 2008 2:19 pm

Postby Taxbar » Tue Mar 01, 2005 3:30 am

The solution to your problem is to have a legal agreement where your mother agrees that you are buying a lottery ticket to be held jointly to be sahred in wahtever proportion is agreed.

This is common in syndicates and used to be in place for the football pools.

Providing such an agreement is in place and legally executed and witnessed BEFORE any win, then each person will have their own share of the winnings and no IHT or CGT implications on a transfer will exist.

Daniel Feingold

John Brennand
Joined:Wed Aug 06, 2008 3:22 pm

Postby John Brennand » Tue Mar 01, 2005 3:44 am

Just to be clear on this Ian. I am assuming that I would pay NO TAX WHATSOEVER on the £1m given to me by mother unless she dies within 7 years of the gift?

In that case does the money have to remain untouched for those 7 years - except for £3000 that I can remove tax free per annum ?

Is that correct ?

Cheers John

Joined:Wed Aug 06, 2008 3:22 pm

Postby gabeck » Thu Mar 17, 2005 2:46 pm

Thankyou for this discussion. I have no knowledge to contribute, but am very interested in the outcome. In particular, were I to have a major lottery win I would hope that I could share my good fortune with friends, free of taxation. I am obviously naive! However, it is very useful to know that such a gift would be treated as a gift from one's "estate", and subject to the well-established "7-year" rules. This subject is unfortunately NOT covered by the Inland Revenue's web site: presumably because they could not conceive of anyone "giving" out of a sense of pure generosity!

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