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Getting out cash.

(47 Posts)
Nanawind Mon 26-Jul-21 20:33:42

If we take a lot of cash out of the bank and give to our children, if we die will our children be taxed.
Even though there is no record of us giving it away.
DH has now wanting to give our children the money before he/we die.

Witzend Mon 26-Jul-21 20:41:05

Obviously I don’t know how much you’re thinking of, but you can each give away £3000 (IIRC) tax free per year anyway, and you can backdate it by one year, so if you didn’t give any away last year then you can each give £6000.

MissChateline Mon 26-Jul-21 20:42:27

Doesn’t it depend on whether it comes from income or savings?

M0nica Mon 26-Jul-21 21:08:23

But ther will be record of you taking from a savings account, or selling investments and HMRC may well ask where that money went, if there is no evidence that you spent it on yourselfs.

Remember every financial institute has to file a complete financial statement with the HMRC every year listing details of all customers, interest earned etc, so theywould quickly pick up any unusual movements of money.

On the other hand, if the money is excess income and it is clear it comes from your monthly income after all your normal bills are paid that is OK.

I have yet to come across any scheme to try to cheat the revenue, thought up by what I would describe as the man or woman on the Clapham Omnibus, that hasn't been already noted by HMRC and made impossible or illegal, with good traps for catching the gullible and naive.

So, Nanawind*, find out what you can do, annual allowances, gifts on weddings etc, money invested for children, but do not try to hoodwink HMRC, they are far cleverer than you give them credit for.

Flexagon Mon 26-Jul-21 21:15:56

You should look at form IHT 400 - link to download here:

www.gov.uk/government/publications/inheritance-tax-inheritance-tax-account-iht400

This shows the inheritance tax calculation that will have to be made by you executors and should take into account gifts made in the preceding seven years. Any tax payable will be a charge on the estate of the deceased not the recipient of the gift.

That's the theory. But a warning to anyone trying to hide or not declare gifts and transfers. A declaration has to be made when making these returns. HMRC can check IHT estate valuations up to twenty years later and they will look at bank account records including those for the seven years preceding a death. If they find anything untoward someone will be liable for back taxes, interest and penalties.

Doodledog Mon 26-Jul-21 21:30:38

How does it work if someone buys, say, an expensive car as a birthday present for one of their children? Or jewellery for a 21st - that sort of thing?

If that is legal, what's the difference between that and giving money?

M0nica Mon 26-Jul-21 21:38:17

Doodledog there is no difference between giving money or giving an expensive gift, the rules are the same.

If the HMRC see you have bought an expensive car, say, a year before you died. HMRC would ask what had happened to the car. If the answer is that it was given to an AC or DGC, or anyone else, the money spent on the car will be added back into the estate.

As I have said, no matter what wizard wheeze the ordinary person thinks up to avoid tax, HMRC will have seen it and made rules that make it impossible years ago.

vegansrock Mon 26-Jul-21 21:42:23

But if you are a billionaire, like the Duke of Westminster, you can tie up all your wealth in trust funds, etc and your kids can inherit half of London.

Flexagon Mon 26-Jul-21 21:43:15

It is £3000 worth of gifts not just cash.

You can also give away the following every tax year:

A wedding or civil ceremony gift of up to £1,000 per person (increased to £2,500 for a grandchild/great-grandchild and £5,000 for a child).

A normal gift, which leaves you able to maintain your standard of living such as for a birthday or Christmas present.

Payments to helps towards another person’s living costs (i.e. an elderly relative or child).

Gift to charities or political parties.

www.mglegal.co.uk/do-we-need-to-declare-gifts-for-inheritance-tax/

geekesse Mon 26-Jul-21 21:44:48

Why would you want to do something that is basically dishonest - and advertise the intention to do so in a public forum?

Scentia Mon 26-Jul-21 21:52:24

I do believe that this will only be a problem if your final estate exceeds IHT levels or you go on to need the state to fund you in years to come. If neither of those apply then probate will not be required and your estate won’t be investigated by HMRC.
If I have that wrong then I am sure someone will tell me!!

Nanawind Mon 26-Jul-21 22:06:15

@geekesse do you know our names or where we live.
What a ridiculous statement.

muse Mon 26-Jul-21 22:17:24

Probate are ruthless and check all bank accounts and savings accounts. Large withdrawals would be questioned.

Our step mothers estate went through probate two years ago.

Cabbie21 Mon 26-Jul-21 22:21:31

Just to clarify, there is no tax payable on gifts given or received in UK, unless , after death, your estate is liable for Inheritance Tax. If it is, any gifts given in the 7 years before death may form part of the estate for IHT purposes. There is taper relief. Normally the tax will be paid by the estate, not the recipients of the gifts.
As far as funding for care is concerned, there is no 7 year limit. If funds have deliberately been given away in order to claim benefits or to attempt to avoid care costs, this is seen as Deprivation of Assets, and you will be assessed as if you still have that money. They can go back further than 7 years.

M0nica Mon 26-Jul-21 22:24:38

Scentia you are right but in that case subterfuge like that suggested is unnecessary, unless the money given away brings the value below the IHT boundary. I think HMRC keep a very beady eyes on estates that come out just below the IHT boundary.

Doodledog Mon 26-Jul-21 22:47:30

As I have said, no matter what wizard wheeze the ordinary person thinks up to avoid tax, HMRC will have seen it and made rules that make it impossible years ago.

I wasn't thinking in terms of a wizard wheeze 😂. It's just that I know quite a few people (mainly students) whose parents have bought them cars as presents, and it's not at all unusual for people to get jewellery for significant birthdays. In the Dog household this would not come to the attention of HMRC, but I was just wondering whether wealthier families would need to keep records of these things.

Callistemon Mon 26-Jul-21 23:16:45

geekesse

Why would you want to do something that is basically dishonest - and advertise the intention to do so in a public forum?

I don't think it is dishonest if the total estate is below the IHT level or you live for 7 years.

There is the consideration that, should you need care and cannot pay, you could be found to have intentionally deprived yourself of assets.

Callistemon Mon 26-Jul-21 23:17:37

Cabbie21 explained it better than me.

Flexagon Mon 26-Jul-21 23:25:53

Nanawind

@geekesse do you know our names or where we live.
What a ridiculous statement.

Not ridiculous at all.

Information HMRC and the Connect intelligence system:

ig-legacy.ft.com/content/0f98bbc0-2db6-11e2-9988-00144feabdc0

library.croneri.co.uk/acmag_194203

Access to such comprehensive data does not just allow investigators to spot anomalies. It also makes it much easier for HMRC to check up on individuals’ tax returns. Take inheritance tax, where HMRC receives about 300,000 paper returns every year. Around 200,000 of those come from estates claiming to be below the taxpaying threshold.

Using Connect, HMRC can sift through information on property transactions, company ownerships, loans, bank accounts, employment history and self-assessment records to spot where estates might be under-declaring. In its first year it raised an extra £26m in inheritance tax.

The Revenue also gets information from less obvious sources, such as adverts on noticeboards in newsagents, stories in local newspapers, and even social networking sites, such as Facebook or Twitter.

Don't discount that GN will be among the social networks that HMRC Connect can trawl. Your IP address will link you to what you post here.

geekesse Mon 26-Jul-21 23:49:11

Nanawind

@geekesse do you know our names or where we live.
What a ridiculous statement.

I neither know nor care who you are, but HMRC do use social media when investigating, and as Flexagon points out, you can be tracked down from your IP address. There may well be people employed as investigators here on Gransnet. In your position, I’d probably as GNHQ to remove my post.

And you failed to address the first part of my question…

welbeck Tue 27-Jul-21 01:51:36

but it is not necessarily dishonest; it is a question about the regulations and procedures.
i think you can give 3K to each child, each year, and it be disregarded for tax purposes.
i'm not sure, as it doesn't affect me.
and then people often confuse the rules re IHT with alienation of assets for assessment of liability for care fees.
which is quite separate, and the council can go back as far as they like. it is a complicated area, so best to take expert advice.

Whatdayisit Tue 27-Jul-21 06:49:03

As pp have stated there are rules on how much you can give away. £3000 a year to each AC and if you haven't given any away before £3000 can be back dated in the first instance. If you stick to the rules and keep a record and are of sound mind even if in the future you need help with care costs you haven't done anything wrong. It is your money. But you can't empty your bank account and hand it all out then ask for help with care costs.
The wealthy understand the rules and use them to pass on their wealth. People confuse the rules and think you can't give anything without it being taken into account later. If you hand it all over it will be questioned. If you use the allowance, as it is your money, it is allowed just keep records.
So you don't take a load of cash out and give it as backhanders you use hmrc rules and stick with the limits and that is allowed.

NotAGran55 Tue 27-Jul-21 07:52:00

A question please if I may as this has got me thinking…

We paid the rent for our 2 sons at university which was more than £6k per year between the 2 of us . Does this count as a gift to them?

Elegran Tue 27-Jul-21 07:53:34

I believe it is £3000 total not per person. Check up on the HMRC website before you act! www.gov.uk/inheritance-tax/gifts

Whatdayisit Tue 27-Jul-21 08:15:03

Notagran55 no that is helping with life expenses not a gift.

It'£3000 per adult child. And other gifts can be made to gc ggcs etc and for wedding presents.