A HMRC inheritance warning has been issued to UK households who are being urged to make things easier for their loved ones and families when they pass away.
HMRC warning for UK households who haven’t kept ’14 years worth of records’
A warning has been issued for UK households and families who need to keep “14 years of records”. A HMRC inheritance warning has been issued to UK households who are being urged to make things easier for their loved ones and families when they pass away.
Households can do this by keeping 14 years of financial, detailed records. Ian Dyall, the Head of Estate Planning at Evelyn Partners, says his colleague’s father left behind a folder labelled: “Dad’s dead – what next!?” after passing, but it was of great help to the family.
Ian said: “This is a relatively simple measure that anyone who is concerned about passing on their wealth smoothly to their family, and making it easier for them, can and probably should adopt.”
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He went on: “Your executors will also need to know what gifts you made in the seven years before your death and potentially in the seven years before the earliest of those gifts, in other words up to 14 years before death.
“That is very difficult for an executor to answer unless you have kept a record of the gifts you have made.” He added: “For example, I have a collection of guitars which would be difficult to value and sell, so I have a list of their approximate values and contact numbers of people I trust who would be able help when selling them.”
The 14 year rule applies where there are CLTs in the 7 years before a PET which has “failed”. This rule is there to ensure that gifts which become chargeable are taxed appropriately by HMRC, which is now operating under a Labour Party government.
To work out if tax is payable on a gift, the law says that it must be added to any chargeable gifts made in the 7 years before the gift concerned. A ‘chargeable gift’ is a gift which is not fully exempt.
A PET is potentially exempt and only becomes fully exempt if the individual who made it survives for 7 years.
Gifts are placed in the order they were made, starting with the oldest and moving towards the date of death. CLTs made in the 7 years before the “failed” PET will use nil rate band first, meaning that there could be more IHT due than anticipated on the “failed” PET.