IHT403 Reporting

[professor555]

I’m struggling to understand what level of detail is required in the calculation of a robust and transparent ‘gift ceiling’ for gifts made out of surplus annual income. IHT403 offers 9 expense categories, some specific (council tax) and others more nebulous (eg household bills -which presumably includes food/drink as well as utilities). And does ‘entertainment’ mean ‘costs of offering hospitality’ or ‘costs of attending concerts’ - or both ? ONS uses 21 broad classifications for family expenditure - am I right in thinking all which don’t read across to IHT403 are swept up in ‘Other’ ? Are historic bank statements and monthly CC bills sufficient as supporting documentation ?

Thanks in advance

Prof

[mironc]

Prof, I agree with everything you've said. I would also query the IHT403 expenditure entry "Travelling costs", which seems a bit vague. Is it the cost of petrol, train tickets, flights (there is a separate entry for holidays, so maybe not)?

It's interesting to note that at the top of the income and expenditure page on IHT403 it says "This is a guide to the type of income and expenditure the deceased may have had so that you can show that gifts made were part of the deceased’s normal expenditure out of their income". So the form is a 'guide', but presumably they want exact figures in the boxes!

I've looked through everything I can find from the HMRC on gifting surplus income, and so far I haven't found much detail on what constitutes income or expenditure. There's some things in particular I'm not sure about...

1. Are Premium bond winnings income? Another thread on this forum discussed what income can be included, and didn't come to a definitive conclusion on whether PB winnings are income.

2. Should one-off expenditure be included? IHT403 says 'normal expenditure' and the HMRC overview of inheritance tax says "usual living costs". For example, should spending £5k on replacing all the windows on your house be included. Should spending £30k on a new car be included. I would say no, because to my mind these are not your 'usual living costs', but is that correct?

It would be great to here from someone who has gone through the process of completing IHT403, especially if HMRC asked for evidence.

[seasider1b]

Sorry I can't answer any of your questions but would like to add a further one!

Are gifts covered by exemptions (eg annual £3k, small gift £250) excluded from the outgo in the excess income calculation. I am assuming so because such gifts are not specifically mentioned, but i am concerned this might be a heroic assumption!

Can anyone clarify please.

[zaxtab]

If the expenditure categories referred to are for guidance only a simpler and complete way of establishing normal expenditure and indeed income I have discovered might be…and with no approximations,,and available,..certainly with my bank,is to download in spreadsheet form for the date period 6April to 5April the Credits(All Income) which can categorised into Salary,Pensions,Annuities etc and Debits(All expenditure) which can categories into Debit Card,Direct Debits,Standing Orders,Online Perchases,ATMs,….once in spreadsheet form any items considered not normal can be deleted so that one can finish with a proper list with subtotals that could be submitted as an alternative list to that on IHT403.

Would HMRC accept this when trying to determine surplus income?…. It would certainly be complete and accurate!…If HMRC required proof of figures , the file containing the spreadsheet could be sent to them.