Gifts out of income

[Brightonian]

I am completing IHT403 for a client who made regular gifts to his children and grandchildren.He had surplus income but the calculation is a little tight. Am I able to deduct the annual £3,000 exemption before showing the balance a gift out of income? I can't find any mention of the interaction between the two exemptions. For example, if he gave £20,000 to his daughter on her birthday, could I claim £3,000 annual exemption and just show £17,000 as a deduction from income?
It also looks as though all the gifts have to be listed on page 2, as well as page 8. I assume it is acceptable to group the minor gifts to grandchildren of around £1,000 p.a. together, while listing the more substantial birthday and Christmas gifts to his daughters separately?
I shall be grateful for any advice forum members can offer.

[Lee Young]

I would claim the annual exemption where there is not sufficient surplus income to cover the regular gifts. AFter all, if it isn't surpls income, then it must have been taken from capital and therefore the annual exemption applies.

[Brightonian]

Dear Lee,

Thank you very much for taking the trouble to reply. It makes perfect sense when you think it through and I will do as you suggest. Thank you.