Hundreds of taxpayers caught out by IHT gift rule
Parents often try to take advantage of the finer details of inheritance tax (IHT) by giving property and money to their children as tax-free gifts.
Some may have been using it incorrectly, however, prompting HMRC to strip the break from parents to the tune of £624 million in the past five years.
Figures obtained by the Telegraph under freedom of information rules showed that 1,830 gifts, supposed to be tax-free, were deemed ineligible because they broke IHT rules.
Gifts can be made tax-free as long as the giver survives for at least seven years after it is made, but a 40% charge will still apply if the giver continues to benefit from the given assets in any way.
To qualify as tax-free, the asset must be given as an outright gift. If someone wanted to continue living in the property they had just gifted, for instance, they must pay rent, which must be at market rates and not a token subsidised amount.
The figures over the past five years mean that hundreds of UK families are needlessly exacting tax charges on themselves, possibly because of a misunderstanding of IHT rules.
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