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Ask Your Own Question, Chartered Certified Accountant
Category: Tax
Satisfied Customers: 4973
Experience:  FCCA - over 35 years experience as a qualified accountant (UK based Practitioner)
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Could you please advise me. An elderly friend has informed

Resolved Question:

Hi, could you please advise me. An elderly friend has informed me that she wishes to pay for a conservatory to be erected at my property. We have been friends for 35 years and having no family of her own she has over the years, very much become a member of ours. She says that she wants to show her gratitude for the friendship and support we give her. Her question is, if she pays for the conservatory direct to the company, will she have to pay gift tax on this gift? this is how she really wanted to make the purchase. The conservatory is £13,850. She is aware that she can give a money gift of £3000 each year and she didn't give one last year so she could give a total this tax year of £6000, and after the 6th April 2016 she is able to give another £3000 totalling £9000. If she gave another £5000 for the remainder, how much gift tax would she have to pay and how and when would this be paid. Also would I have to pay tax on the gift. We can not find any information on whether gift tax has to be paid if the gift is a product and not a money gift. Could you please advise us which is the best way to go. Thank you.
Submitted: 1 year ago.
Category: Tax
Expert: replied 1 year ago.
Thank you for your question.There is no gift tax on any gifts you receive under UK tax. The recipient of the gift receives it free of any tax.Your friend has to consider the implications of this gift for inheritance tax puposes.You are correct in that gifts of £3,000 per annum are exempt from IHT. This way, your friend can gift you upto £6,000 to cover this year and last year and then gift you another £3,000 after 5 Apr 2016.The remainder of £5,000 would be deemed a potentially exempt transfer for IHT purposes and seven year rule would apply to it. If she survives for 7 full years from the date of giving that gift, then the gift is excluded from her estate for IHT purposes.As an alternative she could consider making a further contribution of £3,000 in the tax year 2017-18 (after 6 Apr 2017).More information on gifts and IHT implications can be found here I hope this is helpful and answers your question.If you have any other questions, please ask mebefore you rate my service – I’ll be happy to respond.
Customer: replied 1 year ago.
thank you for your response, could you please advise me what the situation would be if our friend paid for the conservatory direct to the company. Would she still have to pay the gift tax.
Expert: replied 1 year ago.
Thank you for your reply.There is no gift tax. Certain gifts are deemed potentially exempt transfers. In your friends case, the amount that would be deemed potentially exempt transfer is £5,000. Provided her estate was below the threshold of £325,000 including this gift of £5,000 there would be no IHT payable.As the money is not coming to you but going to a company, it could be deemed a gift to you. I would take the route of caution and have the money gifted to you as outlined in previous posted and then her worst scenario is exposure of £5,000.Having said that if her wealth is below the threshold for IHT tax, this amount would be exempt.I hope this is helpful.
Customer: replied 1 year ago.
Thank you very much , your last reply has helped me understand her situation perfectly. thanks again.
Expert: replied 1 year ago.
Thank you for your reply and good words.If you are happy and there are no more issues I will appreciate if you would kindly rate/accept the service I have provided to ensure I get credited for it byJust Answer. and other Tax Specialists are ready to help you
Expert: replied 1 year ago.
I thank you for accepting my answer.
Best wishes.

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