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Where Taxpayers and Advisers Meet

Gifts out of surplus income and self-paid care

langtonbrow
Posts:44
Joined:Tue Mar 10, 2009 1:52 pm
Gifts out of surplus income and self-paid care

Postby langtonbrow » Thu Sep 02, 2021 8:33 pm

Hello,

An elderly and infirm relative lives in an annexe and has limited expenses, courtesy of care provided by family members. The relative gifts money out of surplus income on a regular monthly basis, with statements written and signed to formalise arrangements.

At some future stage the relative may need to pay for their own care, from accumulated capital. This would reduce the scale of their own estate and consequent IHT liability.

The question relates to the acceptability of forgoing income through gifting, and subsequently reducing accumulated capital through spending. The relative is concerned that this may be perceived as IHT evasion rather than avoidance.

This is of course somewhat different from the more commonly asked question on deprivation of capital for state support in personal care. I wonder if HMRC opine on personal spending choices and resultant outcomes. Hence would they be likely to take issue with the scenario presented?

Any thoughts appreciated.
L.

pawncob
Posts:4787
Joined:Wed Aug 06, 2008 4:06 pm
Location:West Sussex

Re: Gifts out of surplus income and self-paid care

Postby pawncob » Fri Sep 03, 2021 12:08 pm

Is there "sufficient income"? If so HMRC won't care.
https://www.gov.uk/hmrc-internal-manuals/inheritance-tax-manual/ihtm14255
With a pinch of salt take what I say, but don't exceed your RDA

langtonbrow
Posts:44
Joined:Tue Mar 10, 2009 1:52 pm

Re: Gifts out of surplus income and self-paid care

Postby langtonbrow » Fri Sep 03, 2021 5:12 pm

Thank you for that.
Presently there is sufficient income, evidenced by a rising current account balance.
If care was needed there wouldnt necessarily be sufficient income and supplementary capital may need to be used, even with gifting stopped.
Alternatively perhaps the care could be jointly purchased from the gifted income? Or does that fall into gift with reservation territory?
Hopefully one of these would pass the HMRC test.
Grateful for the really useful link.


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