scrumpyjack wrote:Maintenance. Although not strictly an exemption, gifts made for the maintenance of family members (i.e. spouse/civil partner, minor children, children in full time education and relatives financially dependent on the person making the gift) are not treated as transfers for IHT purposes so no liability will arise. You could certainly deem much of the 'gifts' described above as being covered by this, and they do not need to have been made out of the donor's surplus income.
But then could I not argue that if I give money to X for something that X needs and because X cannot afford it himself, then by definition X is at least partly "financially dependent" upon me. Therefore those transfers are exempt from IHT? And so IHT only applies for gifts of non-essential items or funds?
scrumpyjack wrote:re the value of the gift, where it is a PET, it is the diminution of the donor's assets that count as the value of the gift, so the comment about the car - it would be what the car cost the donor.
But what about the case where that asset depreciates? In 7 years a vehicle could easily lose 50% or more of its capital value. Some items might lose all their value in that time period. And that would also have been the case had the donor retained the vehicle, whereupon its value in the estate is determined by its current value and not based on what you happened to pay for it?
Again, what if the gifted asset has greatly appreciated? Is the taxman then happy to use the much lower original value? It seems to me that if you are correct about this then there is an inconsistency about the way real assets are valued for IHT purposes. If I keep them then they are valued at current market, but if I gifted them then it is based on original value. In which case then should I always gift things likely to appreciate rather than likely to depreciate?