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I would like to know the tax implications of being named a

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I would like to know the tax implications of being named a beneficiary on my dad's annuity insurance. I am receiving monthly payouts for a fixed period of ten years. Do I need to pay income tax on these, or can the payments be considered gifts from parent to child? Another complicating factor may be that the annuity insurance originates in another EU country, but I live and work in the UK and therefore pay my taxes here.
Submitted: 6 months ago.
Category: Tax
Expert:  bigduckontax replied 6 months ago.

Hello, I am Keith, one of the experts on Just Answer, and happy to help you with your question. I am composing my answer and hope to be back in a few moments.

The rules on gifts can be complex, but as far as Income Tax (IT) is concerned you escape liability. The Guardian advises:

'However, HM Revenue & Customs does not treat a gift of cash as income so you won't be charged income tax on the £50,000.'

However a Potentially Exempt Transfer (PET) will be created in your Father's Inheritance Tax Affairs (IHT). In certain circumstances PETs can be added back to the donor's estate on death and if the estate is insufficient to pay the IHT on the PET then the liability cascades down to the beneficiary for immediate payment.

I do hope that you find my reply of assistance.

Customer: replied 6 months ago.
Hi Keith,Thanks for your help.
Just to clarify, I dont receive cash in hand. The payouts of my dad's annuity policy are transferred to my bank account. Does that change the situation?
Expert:  bigduckontax replied 6 months ago.

Not in the slightest.

Please be so kind as to rate me before you leave the Just Answer site.

bigduckontax, Accountant
Category: Tax
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Expert:  bigduckontax replied 6 months ago.

Thank you for your support.

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