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TonyTax, Tax Consultant
Category: Tax
Satisfied Customers: 15976
Experience:  Inc Tax, CGT, Corp Tax, IHT, VAT.
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Hi, My question is: If a mother has made a gift to her son,

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My question is:
If a mother has made a gift to her son, and the son wants to return the gift back to the mother, what happens then and this should be done? What are the liabilities of either of them with respect to paying tax?

Can you tell me how long ago the mother made a gift to her son? Was it in the form of cash?
Customer: replied 3 years ago.

The gift from the mother was made 6 years ago in the form of cash


Leave this with me while I draft my answer.
Customer: replied 3 years ago.

Meanwhile can I ask another question?

If it's on the same topic (IHT) you can ask it here. If not, you need to post another question and mention my name if you want me to answer it.
Customer: replied 3 years ago.

It is on the same topic IHT.

If the son who received the gift wants to by a flat in the name of his mother, could he do that? and what follows next from IHT point of view?

Hi again.

So long as the mother lives for seven years from the date that she made the cash gift its value will fall out of her estate for IHT purposes.

If the son makes a gift to his mother, its just another gift even if its for the same amount. So long as the son lives for seven years from the date that he made the cash gift its value will fall out of his estate for IHT purposes.

I cannot tell you whether the son should make a gift or not. There may be good reasons for doing so. However, since the mother has almost reached the seven year cut off point, the son should think carefully before making a gift to her. If the mother's wealth is well below the IHT threshold, then its all a bit academic as IHT won't be a problem.

There is nothing to stop the son buying a house which is registered in the name of his mother. I assume she will be able to do with it as she wishes, ie with no strings attached, and if that is the case, it will constitute a gift by the son. However, if the mother is elderly and her estate including the house is over the IHT threshold, then a needless exposure to IHT is being created.

The first £325,000 of a deceased estate is exempt from IHT. It is first used against gifts made in the seven years before death. If the mother is a widow, when she dies her executor can apply to use the unused percentage of her late husband's IHT exemption. You can read about that here.

I hope this helps but let me know if you have nay further questions.

Customer: replied 3 years ago.

Thank you very much.

If the son buys the flat with the cash gifted from his mother and the flat is in his name, how the mother could be protected from risks like son's divorce, death or financial insolvency etc. so that she would enjoy living in the flat till her death without being exposed to the above risks?

I'm not a lawyer and your final question may be better served if you post it in the legal section of just answer. I've answered the tax questions you asked.

It's probable that the son could have a legal document drawn up which entitles his mother to live in the house until her death or she chooses to leave it but such a move may have tax implications of its own, especially if you die before her.
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