Gifting a friend a large sum

[anonymous-user]

I have a friend who I have known a very long time and has given me good advice that has helped my businesses in the past thrive and I have had luck too. However in parallel he has been unlucky at every turn, just one of life's unlucky people. But I wouldn't have what I have without his support and he now has nothing.

It is time for some payback as, for me, there is a moral issue here.

I aim to sell an asset and give him £200,000. Is this deemed a tax free gift subject to the usual 7 year rule or is it deemed as income for tax purposes? ... or something else altogether?

(When I sell the asset I will be paying all the tax due on that sale myself).

Thanks.

[MountainMutant74]

No idea but you sound a very good friend.

The world needs more like you

[JulianPH]

I fully agree with the post above.

It is a gift and so the 7 year Potentially Exempt Transfer (PET) rule applies.

Good on you!

[So]

MikeStroud said:

I have a friend who I have known a very long time and has given me good advice that has helped my businesses in the past thrive and I have had luck too. However in parallel he has been unlucky at every turn, just one of life's unlucky people. But I wouldn't have what I have without his support and he now has nothing.

It is time for some payback as, for me, there is a moral issue here.

I aim to sell an asset and give him £200,000. Is this deemed a tax free gift subject to the usual 7 year rule or is it deemed as income for tax purposes? ... or something else altogether?

(When I sell the asset I will be paying all the tax due on that sale myself).

Thanks.

I recognise that this is not what you asked, but are you sure that gifting him £200k will make him happier? It may make him unhappy.

[selmahoose]

So said:

MikeStroud said:

I have a friend who I have known a very long time and has given me good advice that has helped my businesses in the past thrive and I have had luck too. However in parallel he has been unlucky at every turn, just one of life's unlucky people. But I wouldn't have what I have without his support and he now has nothing.

It is time for some payback as, for me, there is a moral issue here.

I aim to sell an asset and give him £200,000. Is this deemed a tax free gift subject to the usual 7 year rule or is it deemed as income for tax purposes? ... or something else altogether?

(When I sell the asset I will be paying all the tax due on that sale myself).

Thanks.

I recognise that this is not what you asked, but are you sure that gifting him £200k will make him happier? It may make him unhappy.

Or maybe, given the history, he'll quickly lose it all.

Suggestion: set up the asset to produce an income from which he benefits.

(I'm full of good ideas, me)

[So]

selmahoose said:

So said:

MikeStroud said:

I have a friend who I have known a very long time and has given me good advice that has helped my businesses in the past thrive and I have had luck too. However in parallel he has been unlucky at every turn, just one of life's unlucky people. But I wouldn't have what I have without his support and he now has nothing.

It is time for some payback as, for me, there is a moral issue here.

I aim to sell an asset and give him £200,000. Is this deemed a tax free gift subject to the usual 7 year rule or is it deemed as income for tax purposes? ... or something else altogether?

(When I sell the asset I will be paying all the tax due on that sale myself).

Thanks.

I recognise that this is not what you asked, but are you sure that gifting him £200k will make him happier? It may make him unhappy.

Or maybe, given the history, he'll quickly lose it all.

Suggestion: set up the asset to produce an income from which he benefits.

(I'm full of good ideas, me)

Which is one of the reasons it may make him unhappy. He may briefly have access to material things, spend it all and then miss access to material things.

An income-producing asset is a better idea, but then he may feel that he is living off charity.

I wonder whether it would be possible to start a business with the friend and invest the £200k in it. Let the friend earn his own money. It will give him what he probably will value most, self-respect.

People who have gone through life without gaining wealth have done so for reasons other than having had hard luck. Giving them money, history tells us, rarely improves their lives.

[anonymous-user]

Ah, classic PH and the never ending cycle of thread creep. I’m sure they’ll be the obligatory argument soon

Good for you OP - I hope it improves things for your friend.

[selmahoose]

So said:

I wonder whether it would be possible to start a business with the friend and invest the £200k in it.

As bad ideas go, starting businesses with someone who has a lifelong provable history of "bad luck" in business must rank very high.

[anonymous-user]

Thanks for the feedback. I have my answer.

Note he isn't a fool, just has had serious illnesses at the wrong times, an ex partner who destroyed/spent all the family assets during the divorce process, has had much bad luck and sadly got defrauded badly once. He knows that this money is really just to supplement his pension moving forward so his quality of life is adequate, he has only an old age pension otherwise and no assets. So I know he won't p**s it away and will be careful.

It won't bring happiness but it takes away a lot of worry and trouble.

Thanks for your advice.

[So]

MikeStroud said:

Thanks for the feedback. I have my answer.

Note he isn't a fool, just has had serious illnesses at the wrong times, an ex partner who destroyed/spent all the family assets during the divorce process, has had much bad luck and sadly got defrauded badly once. He knows that this money is really just to supplement his pension moving forward so his quality of life is adequate, he has only an old age pension otherwise and no assets. So I know he won't p**s it away and will be careful.

It won't bring happiness but it takes away a lot of worry and trouble.

Thanks for your advice.

As I said, I was giving unsolicited advice there - based upon some experience of the subject - but it wasn't what you asked. So yes you appear to have your answer and I hope it goes well.

[tighnamara]

MikeStroud said:

Thanks for the feedback. I have my answer.

Note he isn't a fool, just has had serious illnesses at the wrong times, an ex partner who destroyed/spent all the family assets during the divorce process, has had much bad luck and sadly got defrauded badly once. He knows that this money is really just to supplement his pension moving forward so his quality of life is adequate, he has only an old age pension otherwise and no assets. So I know he won't p**s it away and will be careful.

It won't bring happiness but it takes away a lot of worry and trouble.

Thanks for your advice.

Good on you, hope it helps your friend.

Out of interest what was the answer on gifting such a high value.

[anonymous-user]

tighnamara said:

Good on you, hope it helps your friend.

Out of interest what was the answer on gifting such a high value.

As per third response. 7 year gift rule applies.

[tighnamara]

MikeStroud said:

As per third response. 7 year gift rule applies.

Thanks, must admit I didn’t think gifting was so clear cut as the seven year rule.
Interesting.

[Hoofy]

MikeStroud said:

Thanks for the feedback. I have my answer.

Note he isn't a fool, just has had serious illnesses at the wrong times, an ex partner who destroyed/spent all the family assets during the divorce process, has had much bad luck and sadly got defrauded badly once. He knows that this money is really just to supplement his pension moving forward so his quality of life is adequate, he has only an old age pension otherwise and no assets. So I know he won't p**s it away and will be careful.

It won't bring happiness but it takes away a lot of worry and trouble.

Thanks for your advice.

Perfect, then, and good on you.

I suppose you could just invest the £200k in your own business and then account for the increase in profit gained from that and filter that off to him every month (taking into account any legal requirements).

Or just give him £1k a month for the next 200 months etc if there is any risk of this money having to be given to the ex-wife?

[HIAO]

MikeStroud said:

As per third response. 7 year gift rule applies.

Assumes both of you are UK resident.

If given as cash, future interest earned will be taxable for beneficiary.

Even with such clear generosity, and friendship; gift should come with legal agreement that clarifies for all parties the terms of the gift and the spirit it was entered into.

[JulianPH]

HIAO said:

MikeStroud said:

As per third response. 7 year gift rule applies.

Assumes both of you are UK resident.

If given as cash, future interest earned will be taxable for beneficiary.

Even with such clear generosity, and friendship; gift should come with legal agreement that clarifies for all parties the terms of the gift and the spirit it was entered into.

1) Which is a natural assumption to make on a UK based website with the poster not suggesting anything to the contrary.

2) Obviously, and any capital gains for that matter. I'm not sure that is relevant to the question though.

3) Wow! You must be fun to be around! A gift is a gift, it is not contractual, conditional or contingent.

Again, good on you, OP.

[595Heaven]

What a lovely gesture. Good on you!

[MrJuice]

No idea about answer to your query.

Posting to say that you are a good person OP

[Sheets Tabuer]

What a fantastic human being the OP is.

[Monkeylegend]

As an investment for the future I have just added OP to "My Mates" list.