Lottery win,treating friends, avoiding the tax man.Possible?

[gregf40]

Mr Trophy said:

You wouldnt pay any tax, however, your friends would therefore pay income tax on his £1 million.

Gifts. Are. Not. Taxed.

Is it really that hard to understand?

[TwigtheWonderkid]

Jockman said:

Centurion07 said:

So you can just give someone a million quid on their birthday and they get to keep the full million? Really?

Yes, really.....so long as you live for the next 7 years.

If you then fall out with your mate post donation you can wait for 6.5 years then sting them with a tax bill by topping yourself.

That'll 'learn' them as they say

Doesn't the level of tax payable go down on a sliding scale over the 7 years? If so, you really need to top yourself as soon as you fall out with them, to ensure they suffer the biggest hit possible.

Edited by TwigtheWonderkid on Tuesday 2nd December 14:10

[Mr Trophy]

Eric Mc said:

Why would the friend pay Income Tax?

Sorry - on the interest he would.

[Eric Mc]

Naturally - assuming he invested the capital sum he received as a gift and it gave him some interest.

[Alpinestars]

Marvtec said:

So if someone is given 6 months to live and has £1m of assets, if they sell up and give it all away to friends/family, when they die they have no money but a huge IHT liability - where/how does this get paid? Would HMRC pursue the recipients? What if they were unaware of the person's health etc?

The recipient.

[Alpinestars]

Buster73 said:

Surely the thing to do would be retrospectively form a syndicate prior to putting the claim in for a winning ticket ?

You might find that this is slightly illegal.

[MitchT]

Alpinestars said:

Buster73 said:

Surely the thing to do would be retrospectively form a syndicate prior to putting the claim in for a winning ticket ?

You might find that this is slightly illegal.

I suggested this earlier in the thread though no one suggested that it was illegal. It was suggested that you can't do this though. It bids the question, just what, precisely, constitutes a syndicate agreement? Is it enough to just write it on a bit of paper and shove it in your wallet, or does it have to be done in a much more formal way? What about workplace lottery syndicates where folk just bung a pound in each and someone goes to the shop and buys a ticket? How would they prove that they were a syndicate before the ticket was bought?

Edited by MitchT on Tuesday 2nd December 17:57

[Ginge R]

contractor said:

How about life insurance policies designed to pay out on death within 7years?

If you're going to insure your life in order to pay an Inheritance Tax bill, just make sure you write the policy into Trust - to keep it at arm's length from your estate. Insurance called Gift Inter Vivos can be written that is specifically designed to reduce the amount of cover you have over the course of 7 years in order to reflect the sliding scale/reducing tax implications of gifting.

[Alpinestars]

MitchT said:

I suggested this earlier in the thread though no one suggested that it was illegal. It was suggested that you can't do this though. It bids the question, just what, precisely, constitutes a syndicate agreement? Is it enough to just write it on a bit of paper and shove it in your wallet, or does it have to be done in a much more formal way? What about workplace lottery syndicates where folk just bung a pound in each and someone goes to the shop and buys a ticket? How would they prove that they were a syndicate before the ticket was bought?

Edited by MitchT on Tuesday 2nd December 17:57

There is no statutory prescribed form. There's a sample on the lottery website. Of course HMRC may never be able to prove when it was drawn up, but something drawn up afterwards is tax evasion, whether HMRC pick it up or not.

[Jon1967x]

Alpinestars said:

MitchT said:

I suggested this earlier in the thread though no one suggested that it was illegal. It was suggested that you can't do this though. It bids the question, just what, precisely, constitutes a syndicate agreement? Is it enough to just write it on a bit of paper and shove it in your wallet, or does it have to be done in a much more formal way? What about workplace lottery syndicates where folk just bung a pound in each and someone goes to the shop and buys a ticket? How would they prove that they were a syndicate before the ticket was bought?

Edited by MitchT on Tuesday 2nd December 17:57

There is no statutory prescribed form. There's a sample on the lottery website. Of course HMRC may never be able to prove when it was drawn up, but something drawn up afterwards is tax evasion, whether HMRC pick it up or not.

It's all a bit unreasonable and more for the syndicates benefits as anyone in a syndicate has a verbal contract.

I rules people have outlined aren't clear as I understood you can make 3k of gifts that will never be taxed even if you died the next day - think of the admin on all those Xmas presents to keep track of.

Anyway.. This is PH and I'm disappointed the OP wasn't the typical fantasist and pretended he had won

[Eric Mc]

Small Christmas gifts would not normally be counted as part of the annual £3,000 exemption. They would most likely be covered by the "Gifts from annual income" exemption.

So no real need to worry about recording such gifts.

[Buster73]

Alpinestars said:

You might find that this is slightly illegal.

It's either legal or illegal it cannot be slightly illegal and I would suggest it would be nigh on impossible for the authorities to prove that there was no syndicate in place prior to the claim going in for the winning ticket.

We have a syndicate at work , an unwritten rule is that anyone behind on their stake payment will be excluded from any payment from the winnings.

But in reality if we won and paid out to six people or let the seventh catch up with the payment so we split the winning between seven people , how would the authorities know ?

Illegal ? , I don't think so.

[Buster73]

Alpinestars said:

There is no statutory prescribed form. There's a sample on the lottery website. Of course HMRC may never be able to prove when it was drawn up, but something drawn up afterwards is tax evasion, whether HMRC pick it up or not.

Lottery winnings are tax free though , if six people split say £1m equally there is no difference in the actual tax paid on interest than if seven people split £1m equally , each person would pay a smaller amount of tax but overall HMRC would receive the same amount in total.

Your argument is not adding up.

[Grumfutock]

gregf40 said:

Mr Trophy said:

You wouldnt pay any tax, however, your friends would therefore pay income tax on his £1 million.

Gifts. Are. Not. Taxed.

Is it really that hard to understand?

Gifts are taxed if you declare them and exceed the limit! I suggest you look up inheritance tax.

[Eric Mc]

Buster73 said:

It's either legal or illegal it cannot be slightly illegal and I would suggest it would be nigh on impossible for the authorities to prove that there was no syndicate in place prior to the claim going in for the winning ticket.

We have a syndicate at work , an unwritten rule is that anyone behind on their stake payment will be excluded from any payment from the winnings.

But in reality if we won and paid out to six people or let the seventh catch up with the payment so we split the winning between seven people , how would the authorities know ?

Illegal ? , I don't think so.

Are you suggesting that those interviewed by the authorities would be prepared to lie about the true make up and history of the syndicate - even if asked to give evidence under oath?

Your definition of whether something is legal or illegal seems to hinge on whether the authorities can get to the truth or not. And whether members of the syndicate are prepared to lie or not.

[gregf40]

Grumfutock said:

gregf40 said:

Mr Trophy said:

You wouldnt pay any tax, however, your friends would therefore pay income tax on his £1 million.

Gifts. Are. Not. Taxed.

Is it really that hard to understand?

Gifts are taxed if you declare them and exceed the limit! I suggest you look up inheritance tax.

We aren't talking about inheritance tax.

If I give a friend £100k for his birthday he doesn't pay any tax on it.

[Grumfutock]

gregf40 said:

Grumfutock said:

gregf40 said:

Mr Trophy said:

You wouldnt pay any tax, however, your friends would therefore pay income tax on his £1 million.

Gifts. Are. Not. Taxed.

Is it really that hard to understand?

Gifts are taxed if you declare them and exceed the limit! I suggest you look up inheritance tax.

We aren't talking about inheritance tax.

If I give a friend £100k for his birthday he doesn't pay any tax on it.

He does if you die within 7 years matey!

[Eric Mc]

Not necessarily. It depends on the size of deceased's estate.

[gregf40]

Grumfutock said:

He does if you die within 7 years matey!

He might do 'IF' I die.

But the point I'm trying to make is at the point I give the gift - he doesn't pay any tax on it.

[Eric Mc]

Absolutely correct. Such a gift is described as a PET - Potentially Exempt Transfer.

Per HMRC -

The 7-year rule - 'potentially exempt transfers'


Any gifts you make to individuals will be exempt from Inheritance Tax as long as you live for 7 years after making the gift. These sorts of gifts are known as 'Potentially Exempt Transfers' (PETs).

However if you give an asset away at any time, but keep an interest in it - for example you give your house away but continue to live in it rent-free - this gift will not be a potentially exempt transfer. Follow the link below to find out more.
If you die within 7 years and the total value of gifts you made is less than the Inheritance Tax threshold, then the value of the gifts is added to your estate and any tax due is paid out of the estate.
However, if you die within 7 years of making a gift and the gift is valued at more than the Inheritance Tax threshold, Inheritance Tax will need to be paid on its value, either by the person receiving the gift or by the representatives of the estate.
If you die between 3 and 7 years after making a gift, and the total value of gifts that you made is over the threshold, any Inheritance Tax due on the gift is reduced on a sliding scale. This is known as 'Taper Relief'.