Tri2000 wrote:... Is there any way to mitigate this? This question is clearly aimed at the big prizes of £1M or £100k.
I'm aware that for Lottery Syndicates, it is advisable to enter into a formal legally sound agreement to share the 'wins' amongst the participants. this article in Taxation
https://www.taxation.co.uk/articles/tax-planning-for-lottery-winners commences along those lines and may also talk of Premium Bond prizes but I'm not a subscriber so cannot comment either way.
In the situation you describe,. the Premium Bond prizes to be paid into a personal bank account of the respective winner (as the Bonds must be held individually & not jointly), I don't feel this could be treated as a syndicate but would be interested to learn if others think differently. If that's the case, I don't believe the source of the enlarged bank account balance is relevant. It is the subsequent cash gift that is relevant; the treatment of which has been outlined in earlier replies.
Btw, your question may better suit Taxes or Legal Issues. Feel free to report your own post and ask for it to be moved to a more relevant Forum.
Having written the above, see and study:
Statement of Practice E14 Published 16 September 1977https://www.gov.uk/government/publications/statement-of-practice-e14/statement-of-practice-e14I'm assuming that SoP is still valid but haven't checked.
The last sentence states
The same principles apply to premium bonds syndicates and other similar arrangements. It may therefore be possible for one of your issue to hold the Premium Bonds personally (assuming the limits are not exceeded) and, assuming an enforceable agreement**** is in existence, one could then distribute a proportion of the "Prize" to the other, seemingly without IHT consequences.
Whether or not your children would be happy with such an arrangement is another matter. If it were me, I'd strongly suggest they cut their ties now without comeback.
*** I haven't looked into the fact that, both being under 18, they may therefore not be in a position to enter into such an enforceable contract.
IANAL & E&OE!