Gifting money

[Eric Mc]

whittroy said:

Could you please explain what PET is. This will help me in my understanding of some of the gifting laws.

Also if the person who the gift is given to is a UK tax payer is this gift then subjected to that person's income tax responsibilities ?

If it is and then it is subsequently drawn back into the original estate on death, can it be taxed again ?

Thanks.

PET stands for Potentially Exempt Transfer i.e. a gift that is not subject to IHT provided certain conditions are met.

The recipient of a gift will not be charged any Income Tax on the amount received. Onviously, if the recipient of teh gift then invest the sum received or use the gift to generate new income (such as a bank account generating interest or a property generating rental income), then that income generated will be subject to Income Tax in the hands of the recipient.

If something is gifted from A to B and is a PET, then no IHT is due - subject to the PET conditions.

If B gifts the same item or amount back to A at a later date, in theory, the same rules should apply.

However, gifts with a reservation of title are not gifts i.e. a gift given on the understanding that the gifter expects it back (it is not a gift in those circumstances) or the gifter expects access and use of the gift even after they are supposed to have given it away.

[whittroy]

That's great. Thanks very much for your comprehensive reply !