I am calculating the surplus income in respect of a client who has moved into sheltered accommodation and looking at what classes as expenditure. No previous regular gifts have been made but there is an intention going forward for gifts totalling around £2k per month. In this particular year and next year there are also a number of large capital gifts from the sale proceeds of her home to individuals and to charity.
My reading suggests that the capital gifts made to individuals are PETs and would not fall within the calculation of excess income for S21 (1)(c) and this appears to be confirmed by IHTM 14255 which states
You should ignore gifts that are not part of the transferor’s normal expenditure and test the condition as if such abnormal gifts have never been made
Using this logic would also suggest you would ignore any large charitable gifts even if they were split into two tax years given this level of gift has not previously been made.
However, the client wishes to claim gift aid on the large charitable donations over the next two years. Claiming gift aid requires there to be sufficient income tax paid to cover the relief being claimed which will be fine. But the inclusion of gift aid has me wondering whether this would alter whether you would include within the normal expenditure computation.
My instinct would be to suggest that these large charity payments are ‘abnormal’ and so do not form part of the normal expenditure out of income computation. But it does feel a bit have your cake and eat it given we are claiming the payments within the income tax comp for higher rate relief.
Has anyone come across this before?