Partner Article

What the Dickens!

As Christmas approaches, be careful you don’t give the tax man an extra Christmas bonus by giving a gift which qualifies for tax.

Normally when it comes to tax, we worry about gifts from employers to employees, but even gifts to family and friends could be subject to tax, particularly if they are large gifts or from certain categories of individuals. Some examples include:

The family heirloom

It might be a nice gesture to gift the next generation an item from the family’s past, perhaps a painting of Grandpa Cratchit. If the chattel is worth more than £6,000 and has gone up in value over the years, the gift will be subject to capital gains tax and could also be included as part of the taxable estate for IHT if the person making the gift dies within 7 years.

The gift to the partner

The spirit of Christmas may lead to overly generous gifts for the special partner in life. Again, if the gift is something which has gone up in value over time, perhaps a piece of jewellery which has been in the family for years, capital gains tax would be due if you are not already married or in a civil partnership with the receiver of the gift.

A gift from a non-dom

It is worth remembering that there are wide rules around remittances of income and gains to the UK. While non-dom individuals can make gifts to adult children and friends from overseas income and gains without any tax liability, a liability will arise if it ends up with a ‘relevant person’, such as a spouse, co-habitee, minor child or minor grandchild.

This will include gifts bought with overseas income and gains and could even mean that if a non-dom grandparent makes a gift to a grandchild, bought with overseas money, it would be taxable (even if routed via the adult son or daughter who is the grandchild’s parent)!

Helping Tiny Tim

Of course, Ebenezer Taxman is not all bad and, for those making gifts to charity, it is worth remembering that Gift Aid ensures that the taxman gives a little more to the charity and those paying higher rates of tax can get further tax relief on their donation.

Direct taxes on gifts at Christmas may be rare and only apply in a few situations. Generally, we can relax and reflect only on the VAT on all the gifts, alcohol duty on the drinks, fuel duty on the trips to family and friend, air passenger duty on flights abroad…and much more. Bah humbug indeed!

This was posted in Bdaily's Members' News section by Baker Tilly .