proof of PET

[mouse]

I have read through a question answered with regards to a cash gift being treated as tax exempt with certain conditions i.e donors death within 7 years.
My question is that my parents want to transfer money into a savings account of mine but I have been warned I could be taxed on this as "inheritance or gifting tax".
How do I declare or prove this money is a PET and not a "gift"? Do I just put the money into a savings account and then declare it next tax year as a PET?

[mouse]

TO add to my question - would it help if the sum were split as 2 seperate gifts to me - one from each parent and thereby further possibly "avoiding" IHT if one dies within the 7 years that the PET allows for?

[hendryk]

(1) PETs are only relevant to inheritance tax (IHT).
(2) PETs only become chargeable to IHT if the donor (i.e. your parent) dies within 7 years of the date of the gift. Thereafter, the gift falls out of the picture altogether.
(3) PETs are (effectively) gifts.

So - to your questions:-

You do not have to show that the "money is a PET and not a gift" - see (3) above. You may have to declare the gift on your annual tax return but you will not declare it as a PET - see (1) above.

If the PET (i.e. gift) became chargeable - see (2) above - then primary liability for any IHT would fall on the donee i.e. you. So your informant is right in that respect. However, whether tax is payable at all and how much, if so, depends on the value of the gift together with the value of any other gifts made by your parents within the 7 years prior to their deaths.

IHT might be reduced if separate gifts were made but it depends on how much money we are talking about and how the money was owned by your parents etc.

These are technical issues, albeit not particular complex ones as far as tax planning goes generally. Your parents would benefit from taking professional advice prior to making the gift.