Some questions on the completion of page 6 of IHT403 form:
State Pension - include or exclude winter fuel allowance and Christmas box?
Include or exclude money spent at local pub - around £1,200 per year - paid by debit card so figures known?
How best to deal with cash withdrawn - this is not gifts as all made by bank transfers - used of day to day living - on average £3,000 per year?
I am happy to be advised other wise but why wouldn’t you include all 3? The winter fuel allowance is income (albeit not taxable, but still income). Spending at a pub is still spending. Doesn’t it just come under entertainment? Cash withdrawals for spending, is still an expense and should be included in whatever box it relates to. For ease, maybe just under ‘other’. The intention of this calculation is to work out what ‘excess’ income in available each year.
Lucy Orrow CTA TEP
Lambert Chapman LLP
My own experience of this exemption (proven at times to be very valuable, if sparingly) is that it should never be pushed to the extreme and a wide inbuilt margin is always desirable; HMRC reserves the right to examine the issue after the event with a jaundiced eye, it has an all or nothing outcome, and so is inevitably subject to an element of uncertainty, only a little reduced by case law.
As regards the expenditure part of the calculation one might draw a distinction between typical recurring outgoings, albeit even of a domestic or personal nature, and whatever else (other than the gift) one might spend one’s money on if one chose to, however predictably.
The legislative purpose seems to be to arrive at a figure of (though not defined as such) net disposable income, taking one year with another. If expenditure is genuinely discretionary, even though tending to recur to some extent, it seems to me to be arguably something deductible from this annual income figure not in arriving at it. If that were not so the figure would have to represent instead net income saved from one year to another.
The position will vary by individual and while someone who spends a regular verifiable and material amount annually at a specific venue e.g. the local pub or on any specific purpose might be well advised to deduct it in the calculation there surely does not have to be a minute detailed investigation of every item of annual expense. I usually content myself with a global estimate of living expenses but do accept that significant distinctive spending patterns of a particular person would need to be evaluated.
Therefore I would err here on the side of including 2 and 3 in expenditure and the State Pension items seem clearly to be income. The latter are fairly modest additions to the calculation and it would concern me that a need to include them might indicate a risky and illusory degree of precision. Of course if the potential downside of no exemption is acceptable a small margin of error might also be.
Jack Harper