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

[Grumfutock]

Eric Mc said:

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

Well considering the scenario is that he just won the lottery I would take it as read that it comes into play!

Edited by Grumfutock on Wednesday 3rd December 16:08

[Grumfutock]

gregf40 said:

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.

Correct. However my point is that if he then lives it up on your generosity and blows most of it, you then drop dead in year 6 say, your mate if fked (financially speaking).

[Eric Mc]

Well - make sure the m,ate reads this thread - and have him spend some money on a life support machine.

[Grumfutock]

Eric Mc said:

Well - make sure the m,ate reads this thread - and have him spend some money on a life support machine.

And a bodyguard?

[contractor]

You want to gift 1M but are worried about the recipient's liability.
Give them 1.05M. Get them to declare an insurable interest in you and then buy a 7 year decreasing term policy that pays out 360k max at year 0, ending up at 0 by the end of year 7. They buy the policy out of the extra cash you gift over the 1m.

[Alpinestars]

Buster73 said:

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.

I used the word slightly as a bit of a joke which was clearly wasted. It is illegal. Period.

The difference is not in the income tax position but the IHT position, so you're missing the point.

Splitting lottery winnings between a syndicate means there has been no gift - they each won the lottery in effect and that is income tax free and is not an IHT "event".

OP gifting an amount to his mate is an IHT event, on which tax may be due. There's a difference.

[Grumfutock]

Alpinestars said:

Buster73 said:

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.

I used the word slightly as a bit of a joke which was clearly wasted. It is illegal. Period.

The difference is not in the income tax position but the IHT position, so you're missing the point.

Splitting lottery winnings between a syndicate means there has been no gift - they each won the lottery in effect and that is income tax free and is not an IHT "event".

OP gifting an amount to his mate is an IHT event, on which tax may be due. There's a difference.

Exactly what I was saying! Woohoo, I was right for once.

[okgo]

Centurion07 said:

I could be wrong but I think you can gift 3k a year to someone and anything over is supposed to be taxed. Interested to see if that's not the case also.

Someone gave me 15 grand the other year, no issues.

[Grumfutock]

okgo said:

Centurion07 said:

I could be wrong but I think you can gift 3k a year to someone and anything over is supposed to be taxed. Interested to see if that's not the case also.

Someone gave me 15 grand the other year, no issues.

Did you tell the tax man? Oh and if not it will only be an issue if that person dies inside of 7 years. If they do then their estate has to account for the money and pay tax on it.

[Eric Mc]

okgo said:

Centurion07 said:

I could be wrong but I think you can gift 3k a year to someone and anything over is supposed to be taxed. Interested to see if that's not the case also.

Someone gave me 15 grand the other year, no issues.

As I mentioned further up the thread -

To clarify the various conflicting messages that are being given -

"gifts" from one person to another are completely exempt from UK tax PROVIDED -

a) the gift is a genuine gift. In other words, once the gift is made, the giver retains no "interest" in what has been given.

b) the giver does not die within 7 years of making the gift

c) the gift is given out of regular, annual income

d) the giver does not give more than £3,000 in any one year

e) the gift is given "in anticipation of marriage"

[Alpinestars]

And if anyone is still confused, it's all here http://www.legislation.gov.uk/ukpga/1984/51

[Slaav]

Eric Mc said:

okgo said:

Centurion07 said:

I could be wrong but I think you can gift 3k a year to someone and anything over is supposed to be taxed. Interested to see if that's not the case also.

Someone gave me 15 grand the other year, no issues.

As I mentioned further up the thread -

To clarify the various conflicting messages that are being given -

"gifts" from one person to another are completely exempt from UK tax PROVIDED -

a) the gift is a genuine gift. In other words, once the gift is made, the giver retains no "interest" in what has been given.

b) the giver does not die within 7 years of making the gift

c) the gift is given out of regular, annual income

d) the giver does not give more than £3,000 in any one year

e) the gift is given "in anticipation of marriage"

For the avoidance of doubt Eric, the structure / English in your statement and explanation could be misleading enough to be confusing?

I think the terms missing are: 'or', 'annual exemptions' and 'potential' amongst a few more

[User33678888]

Interesting. I had been under the impression that gifts were tax exempt. From this it looks like that is only up to 3k. What is the tax consequence of me giving a brother or friend a big sum should I wish? Assuming I don't die in the next 7 years, no IHT. ?

Slaav said:

Eric Mc said:

okgo said:

Centurion07 said:

I could be wrong but I think you can gift 3k a year to someone and anything over is supposed to be taxed. Interested to see if that's not the case also.

Someone gave me 15 grand the other year, no issues.

As I mentioned further up the thread -

To clarify the various conflicting messages that are being given -

"gifts" from one person to another are completely exempt from UK tax PROVIDED -

a) the gift is a genuine gift. In other words, once the gift is made, the giver retains no "interest" in what has been given.

b) the giver does not die within 7 years of making the gift

c) the gift is given out of regular, annual income

d) the giver does not give more than £3,000 in any one year

e) the gift is given "in anticipation of marriage"

For the avoidance of doubt Eric, the structure / English in your statement and explanation could be misleading enough to be confusing?

I think the terms missing are: 'or', 'annual exemptions' and 'potential' amongst a few more

[Eric Mc]

Slaav said:

For the avoidance of doubt Eric, the structure / English in your statement and explanation could be misleading enough to be confusing?

I think the terms missing are: 'or', 'annual exemptions' and 'potential' amongst a few more

Agree.

I (and others) afterwards provided links to the HMRC website where the rules are explained fully. I strongly advise anybody who is confused to go the HMRC site and read the rules in full.

[Slaav]

In a nutshell, gifts are POTENTIALLY Exempt Transfers (PETs) as they are potentially exempt or may become exempt from IHT.

There are actual exemptions that are not classed as PETs due to being actually exempt (£3k per annum, gifts on marriage and gifts out of income etc - HMRC for full definitions and explanation)

There is no limit on the size of a gift. After 7 years it becomes exempt and is pretty much forgotten about for IHT purposes in this context.

Hope that hasn't confused?

What the donee does with any gift then brings other issues....

[grkify]

I believe when you win and go to collect your money you can have Camelot give money directly to other people from your winnings to avoid taxation. Cant remember were i heard it think it was on the lottery channel when that was on freeview.

[Eric Mc]

You heard wrong I guess.

[TwigtheWonderkid]

grkify said:

I believe when you win and go to collect your money you can have Camelot give money directly to other people from your winnings to avoid taxation. Cant remember were i heard it think it was on the lottery channel when that was on freeview.

THERE IS NO TAX TO AVOID.

You can give as much as you like to whoever you like. TAX FREE.

But if you die within 7 yrs of giving the money away, IHT may come into play. It would come into play regardless of who arranged the gift, Camelot or you. If you arrange for Camelot to pay part of your winnings directly to someone else (other than your spouse/civil partner), then it's still a gift and maybe taxable if you die within 7 years.

[Centurion07]

TwigtheWonderkid said:

grkify said:

I believe when you win and go to collect your money you can have Camelot give money directly to other people from your winnings to avoid taxation. Cant remember were i heard it think it was on the lottery channel when that was on freeview.

THERE IS NO TAX TO AVOID.

You can give as much as you like to whoever you like. TAX FREE.

But if you die within 7 yrs of giving the money away, IHT may come into play. It would come into play regardless of who arranged the gift, Camelot or you. If you arrange for Camelot to pay part of your winnings directly to someone else (other than your spouse/civil partner), then it's still a gift and maybe taxable if you die within 7 years.

Apart from the first £3K?

[addey]

What is the situation if you buy lottery tickets on someone else's behalf? i.e. I buy the tickets for someone and they pay me the money for the tickets? If the ticket wins, is it classed as a gift when I then give them the prize money?