Gifting money to siblings

[anonguest]

Not sure if this really needs to go elsewhere, on one of the more finance related boards?......

Long story short....I want to gift money to various siblings (either in lump sum or multiple payments over time) BUT want to ensure they can keep all of it and not be liable ot pay any tax on it.

I am vaguely aware that the limit for monetary gifts without them becoming eligible for tax on the received amount (income tax?) is pretty modest - only a few hundred pounds per year?

I wish to gift much more than this.

First question is obviously, how the heck will HMRC know sibling x has received money from me, unless they voluntarily declare it?

Second question is, to cover the possibility that at some future point might HMRC find out such a donation has occurred, how can I give them the money without tax becoming liable? Although, privately, this is intended as a permanent one way gift, could it be 'disguised' as a private fully above board solicitor overseen interest free loan BUT with a time frame deliberately long enough to ensure I am dead before repayment becomes due - and thus they then get to keep it as an inheritance at that future point.

Thoughts anyone?

[Byron]

! Give the money and live for 7 more years.

2 develop a 'Gambling Habit' draw cash and give it to your children.

3 When I completed my father's estate in 2009, it was obvious that HMRC was not going to check anything. As long as your valuations of the house etc. are within normal limits you won't set any alarm bells ringing.

[anonguest]

In response....

(1) What if I don't end up living for at least 7 years after the gift is made?

(2) the money is intended here for my siblings not my children, who will be dealt with separately in traditional manner (i.e. via a will) - and the sums involved will be more than just a wad of tenners here and there (i.e. 5 figures sums)

(3) I need to ensure the money is given to them in such a way that IF, as unlikely as it indeed may be, HMRC find out such money transfers have occurred, that they dont go chasing said siblings for tax due.

[Butthead]

There's no income tax on gifts.

There might be inheritance tax if you die within 7 years of the gift however the gifts would only become taxable if all the gifts made in the seven years prior to your death exceeded £325k. If you are giving away that sort of money you can afford to seek professional advice, and should do so. If you are giving away much less, then there should be no issue.

If you want to give a few grand to your siblings it's very unlikely there will ever be a tax implication for them. Trying to hide things from HMRC is not advisable though.

[anonguest]

2 minutes ago, Butthead said:

There's no income tax on gifts.

There might be inheritance tax if you die within 7 years of the gift however the gifts would only become taxable if all the gifts made in the seven years prior to your death exceeded £325k. If you are giving away that sort of money you can afford to seek professional advice, and should do so. If you are giving away much less, then there should be no issue.

If you want to give a few grand to your siblings it's very unlikely there will ever be a tax implication for them. Trying to hide things from HMRC is not advisable though.

Can you cite a link/reference for that?

I ask because I vaguely recall seeing (But cannot yet re-find it) that monetary gifts exceeding a modest amount (around about a £1000 per year) are treated, by HMRC, as income by the receipient, and as such liable to income tax.

[Venger]

 

20 minutes ago, anonguest said:

I am vaguely aware that the limit for monetary gifts without them becoming eligible for tax on the received amount (income tax?) is pretty modest - only a few hundred pounds per year?

Isn't that something to do with circumventing parents 'gifting' large sums to their children so they (parents) can take advantage of some of the more generous rate savings accounts there.

Quote

 

Tax on money given by parents, friends and family
 

You can give a child any amount of money, or invest it for them, but if you’re a parent or step-parent there are special rules:

If you have given your child money that earns over £100 a year in interest, dividends, rent or any other investment income, the interest will be taxed as if it were yours.

This doesn’t apply to Junior ISAs, Child Trust Funds and Children’s Bonds (previously known as Children’s Bonus Bonds).

This doesn’t apply to anyone else – grandparents and friends can give as much as they like. However, there might be tax implications that you’ll want to consider. Giving cash at the wrong time or in the wrong way could end up being chased by the tax man at a later date.

https://www.moneyadviceservice.org.uk/en/articles/childrens-savings-accounts

 

There's the £3,000 a year (tax-year) you can gift a person without any tax implications (as I understand it).

 

Quote

 

Updated on 11th April 2016

...Everyone gets an annual gifting allowance and this allows you to gift a certain amount of money to anyone you choose each year without the threat of inheritance tax.

The annual allowance stands at £3,000 for the 2015/16 tax year, which means you can gift up to £3,000 to your children (or to anyone else you choose) this year without any inheritance tax implications.

It is important to bear in mind that this £3,000 limit applies as a total and per person, so you would need to split the £3,000 between your children, rather than giving them £3,000 each if you wanted the money to remain exempt from inheritance tax.

However, if you have not used last year's allowance you can gift £6,000 this year and still avoid inheritance tax issues.

http://www.money.co.uk/guides/gifting-money-to-your-children-faqs.htm

 

All as 'I' understand it, from sources I have read in recent times.

For larger sums, and perhaps with IHT mitigation in mind, I don't know the answers you are looking for, but good on you for future planning/  

Done some of that myself, without any strings attached.  Feels good, for none of us know what's around the corner, and nice to know you've given some position in advance.  Care for loved ones.

[Butthead]

4 minutes ago, anonguest said:

Can you cite a link/reference for that?

I ask because I vaguely recall seeing (But cannot yet re-find it) that monetary gifts exceeding a modest amount (around about a £1000 per year) are treated, by HMRC, as income by the receipient, and as such liable to income tax.

Sort of. It's difficult to prove a negative but here is something from The Guardian:

https://www.theguardian.com/money/2012/jan/11/financial-gift-liable-income-tax

" However, HM Revenue & Customs does not treat a gift of cash as income so you won't be charged income tax on the £50,000. Income tax will be deducted at source from any interest you earn on the lump sum. "

You might be thinking about this:

http://www.legislation.gov.uk/ukpga/2003/1/section/324

...but that relates to gifts from third parties in respect of employment. Like a customer buying you a hamper in recognition of what you did while working for your employer. It doesn't relate to gifts between family members or friends or whatever.

[Butthead]

There's this too:

http://www.thisismoney.co.uk/money/experts/article-2242342/My-brother-wants-40-000-Will-pay-tax-it.html

" Straightforward cash gifts between individuals do not usually attract a UK tax liability. "

[anonguest]

2 minutes ago, Venger said:

 

Isn't that something to do with circumventing parents 'gifting' large sums to their children so they (parents) can take advantage of some of the more generous rate savings accounts there.

There's the £3,000 a year (tax-year) you can gift a person without any tax implications (as I understand it).

 

All as 'I' understand it, from sources I have read in recent times.

For larger sums, and perhaps with IHT mitigation in mind, I don't know the answers you are looking for, but good on you for future planning/  

Done some of that myself, without any strings attached.  Feels good, for none of us know what's around the corner, and nice to know you've given some position in advance.  Care for loved ones.

Thanks for all that useful information. I will digest it and follow it up.

BUT, my immediate response is, this again seems to refer to children. I am referring to giving 5 figure sums to adult siblings.

[anonguest]

9 minutes ago, Butthead said:

There's this too:

http://www.thisismoney.co.uk/money/experts/article-2242342/My-brother-wants-40-000-Will-pay-tax-it.html

" Straightforward cash gifts between individuals do not usually attract a UK tax liability. "

Excellent. Many thanks. 

Looks like the sort of answer I was looking for. The only loose end being the remaining 'what if' I die before 7 years are up issue - and how to circumvent that. Hence my thought about posing the gift as a loan (albeit zero interest and with very long time span before repayment of any amount it due). In other words, a loan that will never, in practice, be repaid.

[Butthead]

No worries,

On your loan point:

If you make a gift and then die within seven years the gift will be included in your estate and increase your estate's value for IHT purposes.

If you make a gift as a long term interest free loan it has to be repaid to your estate on your death, and it then forms part of your estate and perhaps becomes subject to IHT. This happens regardless of whether you die within seven years of making the loan or not.

So by posing the gift as a loan you are actually complicating matters, making it repayable on your death and increasing the chances of it becoming subject to IHT.

If you are likely to live seven years then make those gifts and be happy. There should be no tax implications.

If you aren't likely to live seven years and/or the value of all the things you own is more than £325k then get some help from someone who is an expert. There are legitimate ways to reduce and avoid IHT, you don't need to do anything dodgy.

[The Masked Tulip]

My accountant told me once that the gifter should also hand a note over at the same time saying that the gift is X amount from Mum/Dad to son/daughter, date it, sign it.

[Venger]

7 minutes ago, anonguest said:

Thanks for all that useful information. I will digest it and follow it up.

BUT, my immediate response is, this again seems to refer to children. I am referring to giving 5 figure sums to adult siblings.

It is my view that £3000 a year (tax-exempt, not part of estate if die within 7 years, for IHT purposes) is also for adults.

Quote

annual gift exemption:- everyone is able to gift up to £3,000 per year free from inheritance tax.  If not previously used, then this allowance can be backdated one tax year, giving you a £6,000 allowance;
http://www.fsp-law.com/articles/inheritance-tax-forewarned-is-forearmed

However you're seeking to gift larger sums.  

Don't want to stray into other matters I know less about.

Stay alive though, I like you.

[spyguy]

8 minutes ago, anonguest said:

Excellent. Many thanks. 

Looks like the sort of answer I was looking for. The only loose end being the remaining 'what if' I die before 7 years are up issue - and how to circumvent that. Hence my thought about posing the gift as a loan (albeit zero interest and with very long time span before repayment of any amount it due). In other words, a loan that will never, in practice, be repaid.

How much?

10s of K you could just pass on as cash over a period of time.

[CunningPlan]

How about a family game of high stakes poker? Bit of a shame you are rubbish at poker and keep losing.

[anonguest]

27 minutes ago, spyguy said:

How much?

10s of K you could just pass on as cash over a period of time.

Yes. That's my current planning, rather than a lump sum immediately.

Thanks all for the speedy input.

[anonguest]

3 minutes ago, CunningPlan said:

How about a family game of high stakes poker? Bit of a shame you are rubbish at poker and keep losing.

Hah hah hah. I love it!  I can tell you are a kindred spirit, always seeking to get one up on the establishment and their rules!

Incidentally that vaguely reminds me of what a London minicab driver told me once years ago. That, back then at least, use of casinos was a common form of laundering their cash earnings and hiding it from HMRC for income tax purposes. The method being....take your cash to a casino buy some chips, don'y actually play anything (but maybe take in a drink at the bar), go back a while later to 'cash in' your chips, when asked the choice of 'cash or cheque' by the cashier choose 'cheque' and take it to the bank the next day. Your bank statement would then show lots of 'lucky' winnings from a casino.  ;-)

[spunko2010]

You could ask the siblings to setup companies and be directors of it. Once the money enters into corporate gifts it's much harder to trace back. Particularly if you wind the company up or let it be struck off naturally for failing to file accounts. The liability also is lessened when through a company if hmrc do come chasing. Ultimately five figures in a company bank account is less of interest than in a personal account, and you can write it all off from your own viewpoint legally too via classing it as an investment. 

[juvenal]

http://www.saga.co.uk/magazine/money/personal-finance/giving/tax-and-gifting-money-to-children

 

This link has everything you need to know. £3000 per annum total gifting attracts no penalties whatever, but in the first year you can also claim the previous years allowance.  See article for additional gifts you can make.

[The Knimbies who say No]

4 hours ago, anonguest said:

Yes. That's my current planning, rather than a lump sum immediately.

Thanks all for the speedy input.

Owing to the time of year, and assuming you have not used the £3,000 gift allowance from last year, you can, in the space of around nine weeks, gift £9,000 without any IHT tax implications whatsoever- £6k now, and a further £3k at the start of the new tax year. Dunno exactly how much you are planning on gifting in total, eg if the five figure sum is £20k or £90k, it would change the significance of the £9k quite a bit. Worth doing regardless.

Bottom line is, make use of the limits, gist the rest and document it as a gift. Don't transfer it in the expectation of potential returns later.

[wherebee]

5 hours ago, anonguest said:

Hah hah hah. I love it!  I can tell you are a kindred spirit, always seeking to get one up on the establishment and their rules!

Incidentally that vaguely reminds me of what a London minicab driver told me once years ago. That, back then at least, use of casinos was a common form of laundering their cash earnings and hiding it from HMRC for income tax purposes. The method being....take your cash to a casino buy some chips, don'y actually play anything (but maybe take in a drink at the bar), go back a while later to 'cash in' your chips, when asked the choice of 'cash or cheque' by the cashier choose 'cheque' and take it to the bank the next day. Your bank statement would then show lots of 'lucky' winnings from a casino.  ;-)

Recognised for a while by the authorities.  I know of someone that went after a criminal and in court showed that the probability of all the winnings happening in the casino on the declared game in the time given was greater than winning the lottery 4 weeks in a row.  Convinced the jury pretty easily...

*facts changed a bit to protect the guilty, of course*

[SarahBell]

Open a joint account with all of them and put the money in. And then let them fight over it.

 

 

[Errol]

If you use cash how would anyone know?

[Errol]

Or gold.

[crashmonitor]

The OP sounds very altruistic. Sounds like some Brontesque fraternity from a previous century looking out for ones siblings.

 

 Tbh I have never heard of sibling gifts other than out of a Jane Austen novel where the eldest spreads out their inheritance a bit, sibling rivalry yes.

Sibling loans that never get repaid another definite part of our culture.