Normal expenditure out of income - Going beyond 7 years

Trusts Discussion
1

I am dealing with the estate of an individual who was making large cash gifts regularly to all children and grandchildren. We are going to claim the normal expenditure out of income, but are wondering whether it is possible to go beyond the 7 years. Bearing in mind that the thinking seems to be that income retains its character as income for 2 years, then it follows that if there is surplus income available for the 2 years before the 7 year period, then this could be carried forward. Has anyone here been successful with such a claim? If so, how does one calculate such excess income? Do gifts for those additional 2 years need to be accounted for? And has anyone here ever done this with any success

2

I would imagine that in these circumstances the deceased, or those advising them will have been keeping such records on a contemporaneous basis, so it should be easy to evidence the gifting pattern and “overall” surplus net income over the period taking one year with another, albeit with some temporary shortfalls covered by previous surpluses. Under such circumstances I would argue that accumulated surplus income from before the strict prior 7 year period should be allowed to be taken into account (net of any gifts in those years).
However, if such records were not kept contemporaneously and the exercise is now only being done to try and justify significant gifts for which overall there may be insufficient income, particularly in later years, unless the earlier years could be taken into account, then, playing devil’s advocate, I think that thin ice is being skated on and I would not risk claiming.

Maxine
Citroen Wells

1 Like
3

Thank you Maxine, that is very helpful and I think very much applicable to my case.