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

£3000 Annual gift

sptiht
Posts:1
Joined:Sat Mar 06, 2021 11:01 am
£3000 Annual gift

Postby sptiht » Sat Mar 06, 2021 11:27 am

4 years ago my elderly father transfered £120,000 to me as a gift to invest in a small business. Despite it being a gift I wanted to pay it back and over the next year repaid £6,500. Things got a little tight financially and my father reiterated that he didn't want the money back, so I decided to stop returning money.
My questions are,
1) For the 7 year rule is the remaining £113,500 gift counted as starting from the original £120,000 gift or from when I decided not to return any more money?
2) Despite the £120,000 being transferred as a single lump sum, can I account £3000 for each of the last 4 years as being an annual tax free gift
3) Should I ask him to write letters to state his intentions for the money and if so should the letters be back dated or simply state that this was his intention when the money was transferred
Your help would be most appreciated. Thank you

maths
Posts:8507
Joined:Wed Aug 06, 2008 3:25 pm

Re: £3000 Annual gift

Postby maths » Sat Mar 06, 2021 4:44 pm

This query often crops up in various guises.

When the £120,000 was transferred to you either the intention of your father was that it was a gift OR he intended it to be a repayable loan (whether interest bearing or not). It can't be both.

The IHT treatment is determined at the date of the original transaction.

If it's a gift then there is just one annual £3,000 exemption (possibly another £3,000 brought foraged from the previous tax year).

If it's a loan say repayable on demand and no interest then there is no IHT liability.

Your father could initially lend it and then subsequently decide to write off any outstanding amount. However, he can't say its a gift then subsequently say it's a loan.

AGoodman
Posts:1738
Joined:Fri May 16, 2014 3:47 pm

Re: £3000 Annual gift

Postby AGoodman » Mon Mar 08, 2021 6:24 pm

Better that it all be a gift from day one otherwise the gift only runs from the day your father wrote off the balance.

Don't get hung up on the £3,000. It's fairly irrelevant in the greater scheme of things.


Return to “Inheritance Tax, IHT, Trusts & Estates, Capital Taxes”