Potentially exempt
Alaa
Posts: 30Registered
in Personal Tax
Best Answer
-
CornishPixie
Posts: 107
Ok, so in response to the question you originally asked "are marriage , small gifts potentially exempt ?"
The answer is no - providing certain rules are applied. Those rules will be explained in your text book.
When I took this exam under FA2016, the rules were as follows:
Lifetime transfers of small gifts: - up to £250 per person per year
Lifetime transfers in consideration of marriage - £5,000 by a parent, £2,500 by a grandparent, £2,500 from a party of the marriage (e.g. groom to the bride) or £1,000 from anyone else. With the marriage exemption, the marriage has to have taken place for this exemption to apply.
When you do your exam, the correct figures for FA2018 will be in your tax rates.
Hope that helps to clarify things for you.
Answers
The small gifts and marriage allowances are Exempt Transfers (ETs). Going above these limits may create a Potentially Exempt Transfer (PET) as follows:
For the marriage allowance Cornish Pixie has laid out the limits (above). So, for example, Granny gives granddaughter a £5,000 gift on her wedding day. £2.5k of this is exempt and £2.5k potentially exempt. The "potentially" bit refers to the 7 year rule, so if Granny sadly passes away within 7 years of the wedding then the £2.5k outside the allowance may be taken into account for IHT purposes. This will all depend on Granny's other transfers in and around this time, of course.
Have a look at this article that deals with such a question: https://www.ft.com/content/08c452ce-a6e5-11e8-926a-7342fe5e173f
The situation as I understand it is different for the small gifts allowance. This is £250 per recipient, per tax year. So a gift of up to £250 to someone will be an ET, but if the gift was £260 then the WHOLE thing becomes a PET for IHT purposes, not just the £10 above the limit.
Hope this helps.