Lootman wrote:genou wrote:Lootman wrote:So if the theory is that the chronological order of gifts within a tax year matters, then it appears to not matter very much in practice. Executors will generally declare gifts by the documented intention of that gift and not the historical accident of the claimed date.
It can very much matter in practice. The date of a gift is not an "historical accident" , it is a deliberate decision by the donor ( that decision may be ill-informed, but it is not an accident ).
As stated, it usually will not matter at all, as it doesn't change the IHT due in any scenario that has been presented here so far.
As a thought experiment, I engaged in some rather convoluted conjuring in order to come up with a theoretical scenario where the two methods of reporting come up with a different tax amount.
Take the prior example of a £100,000 gift followed by a £3,000 gift in the same tax year. Let's say the first gift is on 1st May, 2022 and the second gift is on 1st June 2022. There are three possible cases:
1) The donor dies before 1/5/2029. All PETs fail. No difference.
2) The donor dies after 1/6/2029. All PETs expire and are not reported. No difference.
3) The donor dies between 1/5/2029 and 1/6/2029. Only £97,000 of the PETs have expired, rather than £100,000.
In case (3) extra tax is due in the amount of 8% (80% tapering) of £3,000, or £240 in extra tax. Not nothing but barely worth a taxman getting out of bed for on a 7 figure estate. There may also be small differences with a May death in some earlier years due to two different tapering percentages used but that is surely also trivial.
Bear in mind also that the annual £3,000 gifts are not routinely reported anyway so most likely will not be known about.
Note also that the exact date of the gift might not be known and may not be discoverable by the executors, for a variety of reasons. Therefore it must be possible to leave it blank on the form. Or at least marked as not known.