Lifetime Gifting

1. Potentially Exempt Transfers (PETs)

If you make a gift to an individual this transfer has the potential to pass free of inheritance tax providing you survive 7 years from the date you made the gift. If you survive 7 years the gift will fall outside of your estate for Inheritance Tax (IHT) purposes.

If you die within 7 years of making the gift the gift will not fall outside of your estate. BBS can assist you where the value of the gift is less than the Nil Rate Band available and how this affects the Nil Rate Band going forward. We can also advise you where the gift exceeds the Nil Rate Band and how IHT is charged and if any reliefs are available.

The main problem with making a PET is that if the asset that you wish to gift has risen in value since you acquired it you will have to pay Capital Gains Tax (CGT) on its rise in value unless an exemption applies. If you think you may need to pay CGT, we can help you calculate what you might owe and how to make best use of your annual CGT allowance.

2. Gifts with Reservation of Benefit (GROB)

A GROB occurs where a gift is made but not fully given away because the person making the gift retains some benefit for themselves. For example, a GROB would arise if you (the donor) gifted your home to your children and continued to live in the property rent free.

Where a GROB occurs the assets that have been gifted are still treated as part of the estate for Inheritance Tax purposes.

If it is deemed a GROB does not arise then there may be other tax consequences including Pre-Owned Asset Tax (POAT) and CGT.

If you wish to retain an element of control over the assets you wish to gift or you do not want the person receiving the gift to have complete access to the assets gifted, we can advise you as to the best structures you can put in place to ensure you retain an element of control.

BBS are able to provide you with tailored advice in relation to lifetime gifting and help you achieve tax efficiency.