Lifetime Gifts and IHT and gifts out of income

I am acting in relation to an estate whereby the deceased made lifetime gifts to individuals in Uganda (exceeding the value of the NRB). The gifts were to individuals, thereby not qualifying for charitable exemption. The value of the gifts exceeded his annual income. Is it possible to present an argument to HMRC that a % could be said to have been out of income- any advice as to how to present this would be most welcome. Secondly, does anyone have experience in tracing gifts to Uganda made to individuals when administering an estate- if so please could they share their experience.

Anna Stephenson
Swinburne Maddison LLP

If you want to claim the exemption for regular gifts made from surplus income you will need to file form IHT403 and complete the schedule on the back page. I don’t think a percentage approach is appropriate. You should look at each gift, decide as best you can if it is a ‘regular’ gift and then, to the extent there is sufficient surplus income available, apply the exemption. HMRC’s manuals contain a fair amount of guidance because there is considerable uncertainty about how to apply this exemption in practice.

Paul Davies

Thank you Paul. The difficulty I have is that the deceased made in the region of 30 to 50 monetary gifts to different individuals each tax year for the 7 years and they vary in amounts from £200 to £30,000. Id need to prepare a schedule to attach to form iht403 as there wouldn’t be enough space.

Anna Stephenson
Swinburne Maddison LLP

If the donor could not afford to make all of those gifts out of income it follows that he must have liquidated capital and/or borrowed funds to make up the difference. If you are able to ascertain those you should be in a better position to assess the amount
of gifts that were not out of income.
D Holliday

Where the individual gifts are GBP250 or less they can presumably be disregarded.
Is it possible that any were wedding gifts or to help with living costs of elderly or minor dependants that might also be disregarded?
An excel spreadsheet detailing the gifts by individual and year sounds very useful, both for attaching to form IHT403 and for establishing/ascertaining what you are actually dealing with and seeing if there are any patterns.

Maxine Higgins
Citroen Wells