Island Life Magazine Ltd December 2014/January 2015 | Page 145

Roach Pittis advice By Ian Bradshaw Roach Pittis Solicitors, 60 - 66 Lugley Street, Newport, PO30 5EU 01983 524431 [email protected] Ebenezer's generosity E benezer was a wealthy man but famously frugal with it. During the course of his life he made no substantial gifts and it was only after a rather phantasmal experience one evening that he changed his ways and became rather most generous. When Ebenezer died his estate was relatively modest due to his generosity and what with the gifts he made in his lifetime it transpired that there was tax to pay. At the date of his death on December 24, 2014 Ebenezer had like everyone else a current single exemption to Inheritance Tax of £325,000 subject to gifts he had made in the immediate seven years prior to his death. Details of Ebenezer’s gifts were: December 25, 2008 – Mr T. Tim £25,000. December 25, 2009 – Mr B. Cratchit £50,000. December 25,2010 – Mr J. Marley £75,000. Total gifts: £150,000. At the date of his death Ebenezer owned £200,000 worth of assets which in addition to the gifts made in the seven years prior to his death meant that he was deemed to own £350,000 of chargeable assets for tax purposes. After deducting his exemption (£325,000) there was £25,000 worth of assets on which tax was payable at 40 per cent being £10,000. "The inheritance tax system is designed therefore to prevent people avoiding tax" If Ebenezer had gifted the money to T. Tim in 2001 then there would have been no tax to pay on his Estate as this gift would have been outside of the seven years immediately before death. Only gifts to Mr Cratchit and Mr Marley would be included within his tax calculation (£125,000) thereby bringing his estate equal to his exemption (£325,000) therefore no tax. The inheritance tax system is designed therefore to prevent people avoiding tax by making gifts to individuals just prior to death. In order to avoid the potential of gifts being treated as part of your estate it is best to make the gift as soon as you are able thereby commencing the seven years as soon as possible and also ensure that you do not continue to benefit by the gift made. That said, gifts should only be made of assets or amounts that you are certain you can absolutely do without and will not make a difference to your life. Once a gift is made the gift, control and ownership is gone. The recipient of the gift can also make a difference for tax purposes. Gifts between husband and wife or civil partners are exempt anyway provided they are UK domiciled. Special rules also apply for gifts into trusts or companies. Capital Gains Tax may be relevant for lifetime gifts of assets that are not cash. www.visitilife.com 145