Inheritance tax gift exemptions

[MrChips]

A little surprised yesterday as the solicitor who we've instructed to deal with my mum's estate has sent through his rough calculation on IHT based on a list of gifts that we provided, but after I questioned a couple of figures, he started even questioning himself!

So apart from seeking another solicitor to double check the calcs, can any trusted PHer confirm?

- The 3k annual exemption (if unused) can be passed onto the following year, but are gifts in a specific year taken from that years allowance first, and only once the 3k for that year has been used, does it look backwards 1yr to check if there is any unused from the previous year? The government website states "Leftover annual exemption can be carried over from each tax year to the next, but the maximum exemption is £6,000" But this is surely a bit unclear?
Example:

Year 1: 3k allowance, No gifts. No taxable
Year 2: 6k allowance, 4k gifts, No taxable
Year 3: What is the allowance?

A: 5k? (3k from year 3, and 2k from year 2)
or
B: 3k? (as you used all of year 2's specific 3k allowance?)


Also

- There is some notes here https://www.gov.uk/inheritance-tax/gifts relating to "Regular Gifts from the giver's income:
"There’s no Inheritance Tax on gifts from the deceased’s income (after they paid tax) as long as the deceased had enough money to maintain their normal lifestyle. The gifts include: Christmas, birthday and wedding or civil partnership anniversary presents"

How does this work in reality? My parents lived mortgage free for quite a while, and certainly they're overall income was higher than expenditure even after my dad retired, so it would seem that most gifts that were given would technically just have reduced their income, rather than diminished any savings.
However, at present we are only just over the tax free threshold anyway so I don't want to go down what looks like a long and complicated path in order to reduce the tax bill to zero, if it'll just drag out the entire process?
Anyone have experience of dealing with IHT from regular income? Are there any rules/guidance as to what specifically is exempt?

Thanks in advance!
MrChips

[MrChips]

No one?

[MrChips]

Finally managed to get through to the HM revenue helpline, and their answer was B) 3k. Hmmm.

Why can't they just have some worked examples to show you!

Good point on the income allowance side of things, and potentially good for us as my parents lived mortgage free. Our solicitor hasn't even mentioned it but the chat with the helpline today seems to suggest it might not be that much more work to complete the extra section of the forms if it does benefit us.

So far not impressed with our solicitor as I thought the whole point of paying someone was to ensure that you're getting the right advice and options as they should be experienced with it!

[MrChips]

I guess it does also say that includes birthdays, or christmas, and I wouldn't have normally put those into the "regular" category.

Looking at our figures, I doubt any of the gifts can be considered regular enough, and as we're not facing a massive bill anyway, it seems a bit unnecessary to do all the work to trawl through their account with enough detail to show that it was from income. I've also seen that annuity income is potentially not counted as income, which would stop our claim anyway. We're paying the solicitor for their time, so any work/input we ask them to do also has a cost attached to it so I guess we'll need to way this up against the potential reduction in tax.

Thanks Sumo for the confirmation from the guidance notes . Despite an hr of searching I hadn't been able to find it, even though I knew it must exist! Bit disappointed the solicitor wasn't able to confirm this straight away!

[MrChips]

We've come across one final stumbling block before we submit our returns so thought I'd see if anyone sees this differently.

My mum paid for some of the wedding suppliers and venue costs for our wedding, as well as giving us a gift on the big day.

We've declared all our accounts to the solicitor but they believe we may need to also count the money that mum paid for the event itself.
My view is that this is a grey area, in that the money she spent was also for her benefit (she wanted to have a big wedding and helped chose the venue because she could afford it).
The hmrc helpline was useless and only kept repeating about the wedding gift allowance which we've used already to cover the cash gift she gave us on the day.

If we take out the word "wedding" and said for the sake of argument that this was a large birthday party that mum had paid for, then it wouldn't even have been on our radar to declare, as it's just payment for an event/service.
Any thoughts? Is this really all needing to be declared as a gift?
Our solicitor is going to look for any previous cases but he doesn't remember any but that seems strange as it can't be that rare for a parent to pay for an event?!