What's the logic of inheritance tax?
Discussion
Off topic and I'm probably missing something obvious, but how do the Revenue investigate your average dead relative's affairs? Is it down to the solicitor dealing with the probate to disclose any potentially liable transactions/gifts etc?
Say I bought a property with my cash but put it into a relative's name, I live there for £1 a year or whatever whilst still owning my previous residence, I then kick it a year or two later - how do the Revenue know if the solicitor doesn't say anything?
Say I bought a property with my cash but put it into a relative's name, I live there for £1 a year or whatever whilst still owning my previous residence, I then kick it a year or two later - how do the Revenue know if the solicitor doesn't say anything?
Mr E said:
Don't get me started on this. 13 months in and I'm still fighting probate.....
"Can you prove he's dead"
"Well, be burned him to ashes, that's usually a good sign"
Get ready for the long haul, then. We think that my mother-in-law's probate is fainally settled to the satisfaction of the IR (54 months after she passed on), but we're still getting bills for interest that we haven't incurred that have to be sent back and sorted every time.
Bunch of complete feckwits at the IR, if you ask me.
Trommel said:
Off topic and I'm probably missing something obvious, but how do the Revenue investigate your average dead relative's affairs? Is it down to the solicitor dealing with the probate to disclose any potentially liable transactions/gifts etc?
All your assets & bank accounts etc are frozen as soon as you shuffle off until such time as the IR is happy to release them.
The only think you can get away with AFAIK is the large box of cash under the bed that doesn't appear in any accounts anywhere and might mysteriously disappear to a relative for "safe keeping".
>> Edited by pdV6 on Thursday 7th October 12:12
vixpy1 said:
anonymous said:[redacted]
You are only allowed to "gift" a maximum of 3,000 pounds in any one tax year, however this can be backdated one year, making in effect 6000 in the first instance......
See, i've never understood this rule. Does this only apply in the IHT situation or generally? Can someone explain?
This is a general rule, nothing to do with IHT...
I think there are very MINOR exceptions such as paying for a wedding etc....
Perhaps Eric MC can advise.......
anonymous said:
[redacted]
I havent read the remainder of this thread, but it is interesting and I will get back to it.
In the meantime, Tonker, I think you have misunderstood the document there (easily done).
Basically, what the author is highlighting there is that on the death of one spouse, its better to use their nil rate band to pass onto the kids, rather than let the estate pass in its entirety to the remaining spouse, only for them to die and leave the entire estate to the kids, to have only one nil band, hence paying more tax. He is saying its better to aggregate the two available bands, rather than let one spouse die, and pass this onto the next spouse without taking advantage of the first dead spouse's exemption (nil rate band).
Its not the best tax reduction advice
There is indeed a total exemption between husband and wife.
Wacky Racer said:
This is a general rule, nothing to do with IHT...
I think there are very MINOR exceptions such as paying for a wedding etc....
Perhaps Eric MC can advise.......
But how do they stop you? Surely if its taxed income you can do what you like with it? And does it only cover cash or investment holdings as well.
I know that if you dispose of an asset like shares to someone then you have to pay the CGT on the rise in value the share has made but its all most confusing!
ninja_eli said:
There is indeed a total exemption between husband and wife.
...but only where the asset (not necessarily a house) is wholly owned by both parties jointly IIRC.
Note that on death of a spouse, any joint bank accounts will still be frozen until such time as probate is granted, even if everything is passing to the other spouse by survivorship. (Hint: make sure you both have sole accounts so that you can go on paying the bills whilst the IR does its thing)
vixpy1 said:
But how do they stop you? Surely if its taxed income you can do what you like with it? And does it only cover cash or investment holdings as well.
They don't "stop you" as such, rather they calculate how much you owe them in IHT after the event, even if you have nothing left with which to pay the tax bill.
Yes, everything is covered, with certain exceptions (wedding costs being one). As my mother-in-law passed on very shortly before our wedding, it may or may not have been the case that our entire wedding was paid for out of her estate (for tax purposes), never mind the fact that my parents were footing 1/2 the bill.
(note, this could all be a theoretical exercise and may have no basis in truth, for any IR personell who may be tuning in...)
BliarOut said:AFAIK cash wise a parent can give as much as they want to their kids as long as they live 7 years past that point. Where it all goes wrong is where property is involved.
So what's the crack on gifting and the seven year rule if you get over £6K
Funny that, how most people have houses but not money
Wasn't this the country that encouraged people to go out and buy their own homes?
Ivan
pdV6 said:
There is indeed a total exemption between husband and wife.
...but only where the asset (not necessarily a house) is wholly owned by both parties jointly IIRC.
Note that on death of a spouse, any joint bank accounts will still be frozen until such time as probate is granted, even if everything is passing to the other spouse by survivorship. (Hint: make sure you both have sole accounts so that you can go on paying the bills whilst the IR does its thing)
No thats incorrect. The exemption is complete.
There are so many techniques for IHT. I know all this because I have had to help protect my fathers assets. He is non domocile, but that does not protect UK assets. However, with a variation of foreign company ownership of assets, commercial property structuring of assets and others, which I cant be arsed to go into now, it is possible to save all assets from IHT. Thats why the tax planning advice of using the first dead spouses IHT nil band is a crap advice to me. £526K worth of nil band is absolutely useless.
Tax planning for big amounts must be done carefully and is a lot less obvious than those kind of things.
Will read the remainder of the thread, but it is interesting. I think JSG should be more arguing for a capital gains tax, with indexation allowance etc. Otherwise a flat 40% tax on all things over £263K is nonsense.
Plotloss said:
Avoiding tax...
30% goes to whoever you fancy, 70% as costs.
Charity Commission might just raise an eyebrow a smidgen.
"We see that your uncle Harold and his wife Ethel, trustees of the charity established by your late mother with the purpose of "establishing pleasant surroundings for hamsters called Eric and the people who look after them " has paid you a salary of £50,000 pounds in return for looking after Eric and has disbursed £22,000 on a gem encrusted cage for Eric. We do not feel that Harold and Ethel have made sufficient efforts to find other hamsters called Eric and are therefore failing in their dutees as trustees to pursue the established objectives of the charity. We have therefore appointed an administrator and brought the matter to the attention of Inspector Knacker of Scotland Yard, etc ..."
Trommel said:
That makes sense - but say you estimate the estate to be under the IHT limit for purposes of probate, solicitor has all the current bank account books etc which don't show the cash going out. Why/how would it be investigated?
There's an enormous form to fill in (IHT200), with a plethora of optional supplementary forms, depending on your circumstances. As with all dealings with the IR, you have to be able to show documentary evidence for the figures you submit. If they smell a rat, they'll delve into it with a fine tooth comb. The solicitor isn't the one who signs off the tax return - its the executors, so they're the ones liable if any "funny stuff" is uncovered.
Using a solicitor to prepare the IHT200 is the sensible option even so, as its a hideously complex task and needs real familiarity with all the rules & regulations and expecially with all the allowed exceptions in order to reduce the tax burden as far as possible.
Unfortunately, its never cut and dried (as I know only too well, as we have several software products that automate the process as far as possible) and the bottom line is that as long as the tax inspector is happy, its ok. You can ask the same question of 3 different inspectors and get 3 different answers, each of which is correct, just so long as the appropriate inspector reviews your submission! Its a fecking nightmare.
Ribol said:
I have not read the above posts because of health issues (raising my blood pressure).
Yup.
I have read them this far but can't carry on, not because I disagree with the prevailing opinions but since the topic itself is enough to illicit a one man civil war, Delta F stylee.
As far as I'm concerned, anything that decreases legally formulated individual assets is an affront to everything I hold dear, period.
Limited taxation is a necessary evil but I'm convinced by the Smithsonian precept that broadly favours the individual's consumption & investment decisions rather than what we have in Blighty, namely profligate, non-infrastructural, governmental fiscal frippery.
It's no good, I'm starting to do a Mount St Helena...must away for a period of whale song to avoid an embolistic end...
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