Postby AGoodman » Mon Jul 12, 2021 3:45 pm
I think by lifetime exemption, he was referring to the nil rate band (£325k).
In theory (and by default), the tax on gifts is paid by the recipient.
However, in practice, those gifts are usually absorbed by the nil rate band (i.e. are taxed at 0%) so the recipient doesn't pay any tax. The recipient would only have to actually pay if the donor's non-exempt gifts exceeded £325k over the last seven years of their life (in which case they would pay tax on the excess over £325k).
The gifts reduce the nil rate band available to the main estate so, in practice, the main estate ends up paying more IHT that it would with an unused nil rate band.
If the donor is making very large gifts, they can opt to pay the any tax that might arise on the gifts either by deed of covenant or (more often) by a clause in their will.