The following Trusts and Inheritance Tax guidance note Produced by Tolley in association with Emma Haley at Boodle Hatfield LLP provides comprehensive and up to date tax information covering:
A valuable exemption from inheritance tax (IHT) applies to gifts out of surplus income. This exemption applies only to lifetime gifts and is therefore a key part of lifetime planning. The exemption applies to both outright gifts and gifts into trust.
Gifts which meet the qualifying conditions (see below) are immediately exempt from IHT so it is not necessary to survive seven years to obtain the exemption. Exempt gifts are not aggregated with later gifts and do not eat into the IHT nil rate band. Clients should make use of basic exemptions such as this before embarking on more complex lifetime planning.
There is no set limit on the amount that can be given away, provided the gift does not exceed the donor’s surplus income.
The qualifying conditions in order for this exemption to apply are as follows.
Gifts made from capital will not be covered by the exemption and it will ultimately be necessary to demonstrate that the gifts were made from net (post-tax) income (see ‘Claiming the exemption’ below).
Income normally takes the form of cash and so cash gifts are the most obvious format for this exemption.
However, HMRC accepts that a gift of other assets can qualify, provided the item in question was purchased specifically from surplus income with the intention of making the gift.
HMRC considers income to be current income, which is generally taken to mean income from a particular tax year, although some carrying over of income from year to year is permitted.
However, the exemption will not apply to gifts made from income which has been accumulated over
**Free trials are only available to individuals based in the UK. We may terminate this trial at any time or decide not to give a trial, for any reason.
Access this article and thousands of others like it free for 7 days with a trial of TolleyGuidance.
Read full article
Already a subscriber? Login
The substantial shareholding exemption (SSE) provides a complete exemption from the liability to corporation tax on the gains generated from qualifying disposals of shares and interests in shares by qualifying companies. Conversely, if losses are generated by the disposal and the SSE conditions are
‘Hold-over’ relief allows for the deferral of a gain that would otherwise arise in relation to a disposal. No capital gains tax (CGT) is due in respect of the disposal, but the base cost of the asset for the transferee for the purpose of a future disposal is reduced by an amount equal to the gain
The majority of state benefits (also called social security benefits) are managed by the Department of Work and Pensions (DWP) via the Jobcentre Plus.Some benefits are dependent on a national insurance contribution record (and different classes of national insurance provide different benefit
This guidance note explains how to calculate the amount of tax that arises under the lifetime charge. In general terms the lifetime charge will apply to individuals who transfer property into a trust that is subject to the relevant property regime. See the Chargeable transfers and Occasions of
To view our latest tax guidance content, sign in to Tolley Guidance or register for a free trial.