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The plot size is over the permitted area so there will be a liability to Capital Gains Tax (CGT) on any gain made between acquisition of the site and market value on disposal. This will be taxed at 10% or 20% or a combination of the two rates depending on their income including the gain in the tax year of disposal. There is an Annual Exempt Amount (AEA), currently 12K, to offset the gain.
Making a gift creates a Potentially Exempt Transfer (PET) in their Inheritance Tax (IHT) affairs. PETs run off at a taper over 7 years and in the event of a decease within this period are added back to the estate for inclusion in the IHT computation. PETs are the first to suffer IHT and if the estate is insufficient to meet the tax on the PET then the liability cascades down to the beneficiaries for immediate payment. IHT does not kick in until assets on death exceed 325K.
You have it to a 'T,' to use an old expression. The IHT danger is the PET as there is no IHT on inter spousal bequests and the PET might catch up with the survivor in the longer term. Always bear in mind Benjamin Franklin's quip that in life there are but two certainties, death and taxes!
The classic defence against this is a short term life insurance policy.
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