Giving friends money

Next year one of my companies will be sold and it should leave me fairly well off. In 2018 I went through hell and friends of mine helped me out.

I'll want to furnish them with some moolah to say thank you, and it'll be coming from me personally, from savings that come from my already taxed income (i.e. from the sale of the business).

I don't plan on carking it for well over seven years, fingers crossed, so will they be liable for tax on it?

I can't make head nor tail of "advice" from various websites.

A quick search suggests the annual tax free limit is £250 which seems stupidly low. Whether your friends declare it will be up to them. Realistically if they "forget" to declare it will HMRC ever find out - Very very unlikely I'd say as it will be coming from your personal funds.

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Originally Posted by Filterlab

Next year one of my companies will be sold and it should leave me fairly well off. In 2018 I went through hell and friends of mine helped me out.

I'll want to furnish them with some moolah to say thank you, and it'll be coming from me personally, from savings that come from my already taxed income (i.e. from the sale of the business).

I don't plan on carking it for well over seven years, fingers crossed, so will they be liable for tax on it?

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I suspect the answer is no but you’d only get a definitive answer by looking at the detail of what friends did and what was said at the time. If you link the gift with something specific (eg unpaid assistance given in 2018) there’s maybe more chance of an issue. It’s unlikely provided there was no expectation of or entitlement to “reward” for help given.

Don’t know what legal types here think but, if the amounts aren’t trivial, might be worth getting the gifts legally documented as such with a deed of gift.

You could pay for a nice holiday for your friends, with them or them individually with their respective families.

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Originally Posted by andy tims

A quick search suggests the annual tax free limit is £250 which seems stupidly low. Whether your friends declare it will be up to them. Realistically if they "forget" to declare it will HMRC ever find out - Very very unlikely I'd say as it will be coming from your personal funds.

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If we’re talking about IHT, I think it’s the executor’s job to identify gifts made by the individual.

If the payments were deemed a payment for services, etc., then the recipient would be responsible for reporting to HMRC if required.

If the amounts involved are reasonably large, might be worth chatting to an accountant to be sure there’s nothing that might crawl out of the woodwork at a later date.

Yeah. I think I will be running it by my accountants whatever happens.

It's purely a gift for being unbelievable friends in a terrible time for me. Nothing more than that.

And it will be a fairly substantial amount too.

I’ve recently signed off on a series of payments from a trust to numerous individuals who were or had acted as very good friends at some point over the years to one of the trust’s beneficiaries. The payments were quite sizeable, and would be life changing for some people.

The payments followed a letter explaining why they had been chosen to receive a payment, and stating that they should take advice (essentially if they were unsure) about any element of declaring the income.

All expressed the gratitude in writing.

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Originally Posted by Omegamanic

I’ve recently signed off on a series of payments from a trust to numerous individuals who were or had acted as very good friends at some point over the years to one of the trust’s beneficiaries. The payments were quite sizeable, and would be life changing for some people.

The payments followed a letter explaining why they had been chosen to receive a payment, and stating that they should take advice (essentially if they were unsure) about any element of declaring the income.

All expressed the gratitude in writing.

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Thank you, that's great information. Just what I'd hoped would be possible.

Sounds like a lovely gesture and well done on getting through a difficult period to achieve a positive outcome.

From the recipient's perspective HMRC does not treat genuine gifts as income so there would be no income tax for them to pay.

From the giftor's perspective there could be IHT implications if they didn't survive >7 years.

Well I'm only 46 and in great shape, so I'll avoid crossing the road in front of buses. :smile-new:

I may be completely wrong but I don’t understand why this has any HMRC implications if it is taxed money and you don’t die within 7 years.

Surely you can gift your money (which you have paid full U.K. tax on) to who you like as long as there is no later IHT issue, which there should not be once 7 years have elapsed.

Nice gesture and hope your friends will be pleased.

I recently did something similar to help friends who were struggling during covid lockdowns. The advice I received was that it wouldn’t be an issue unless something happened to me within 7 years.

Just give it to them in cash, if the revenue somehow find an excuse to question it, say you blew it on the usual stuff

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Originally Posted by noTAGlove

I may be completely wrong but I don’t understand why this has any HMRC implications if it is taxed money and you don’t die within 7 years.

Surely you can gift your money (which you have paid full U.K. tax on) to who you like as long as there is no later IHT issue, which there should not be once 7 years have elapsed.

Nice gesture and hope your friends will be pleased.

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Thanks, I hope they'll be pleased too.

I believe it's to stop people quickly moving assets to other people when they learn of sudden impending illness etc.

This may be useful https://www.money.co.uk/guides/how-d...ut-being-taxed

annual gift allowance in UK of 3K - above which the gift may be taxed - see article for explanation. Basically stay alive for >7 years then no tax due.

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You’ll find more information on these types of gifts below. But, as a quick check, no tax is paid on monetary gifts that meet the following criteria:

You give the gift more than seven years before you die
You give the gift to your spouse, civil partner, or a registered UK charity
The amount is less than your annual allowance of £3,000

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Originally Posted by noTAGlove

I may be completely wrong but I don’t understand why this has any HMRC implications if it is taxed money and you don’t die within 7 years.

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Originally Posted by mr.chef

I recently did something similar to help friends who were struggling during covid lockdowns. The advice I received was that it wouldn’t be an issue unless something happened to me within 7 years.

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Tax is entirely based on specific facts and so getting into the detail is necessary to be absolutely sure.

For example, if the OP had promised to pay his friends for their help if he ever came into money, that might be sufficient for HMRC to argue that was delayed taxable payment for services. Better to think it through at the time. OP wants to give a gift not a tax investigation!

They have no idea that I'll be gifting them any money.

And yes, no tax investigations please. Life's hard enough! :smile-new:

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Originally Posted by adrianw

Just give it to them in cash, if the revenue somehow find an excuse to question it, say you blew it on the usual stuff

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coke 'n' hookers or watches 'n' size 8 brogues?

As you will be paying higher rate tax, cnsider gifting beneficiaries 0.1% shares in the company before you sell. Beneficiaries may only be liable at 20% and your gift remians the same ultimately? A bit left field, i know…

No knowledge to add but well done for getting through the difficult period a few years ago and being in a completely different place now. I'm sure your mates will appreciate it.

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Originally Posted by deepreddave

Sounds like a lovely gesture and well done on getting through a difficult period to achieve a positive outcome.

From the recipient's perspective HMRC does not treat genuine gifts as income so there would be no income tax for them to pay.

From the giftor's perspective there could be IHT implications if they didn't survive >7 years.

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^^^ Seconded. Caveat: I'm an accountant but not a tax specialist and recommend you discuss your plan with a tax accountant

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Originally Posted by adrianw

Just give it to them in cash, if the revenue somehow find an excuse to question it, say you blew it on the usual stuff

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Yeah...wine, women & you wasted the rest!

Out of interest, and sadly not applicable to me, but what happens to lottery winners who choose to make gifts to family and friends? All fine as long as they live another seven years?

In the same vein what about money put aside for the kids to help them get on the ladder once they their education….

Is there a proper way to make you dont pay again on earnt taxed money 😞

Cheers

matt

Make the gift and take out a cheap inter vivos 7 yr insurance policy. Should be fine

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Originally Posted by MattH

In the same vein what about money put aside for the kids to help them get on the ladder once they their education….

Is there a proper way to make you dont pay again on earnt taxed money 😞

Cheers

matt

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Same rule for this and lotto winner gifts - only IHT applies, and just stay alive for another 7 years.

I’m not in any position to offer any qualified advice, but just wanted to say what a great gesture that is and I think it will give you immense satisfaction in being able to give something back.

I’ve always liked you Filterlab ;-)

Give it to them in cash, withdrawn over a period of time. Nobody will ever question it but if they did, coke and hookers.

As above, gift it and stay alive for 7 years. Job done.

I’ve always liked you too …

Thanks for all the kind wishes (and loves) fellas.

I believe in surprising people who've gone out of their way to help in times of crisis. 2018 was a bad year, but throughout it I managed to hold on to my company shares unhindered, which will pay off for me and my friends - and not for my nasty ex wife, due to her solicitor's big mouth. :smile-new:

Once the company is sold, and friends furnished, I can then start my homeless charity, free to help those who've found themselves without a home due to extenuating circumstances (which would have happened to me were it not for my friends).

Life's strange and the tide changes quickly, but having brilliant friends, who are there when one's family is not, is a priceless gift.

Absolutely fantastic and I wish you all the good fortune in the world.

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Originally Posted by Filterlab

Thanks for all the kind wishes (and loves) fellas.

I believe in surprising people who've gone out of their way to help in times of crisis. 2018 was a bad year, but throughout it I managed to hold on to my company shares unhindered, which will pay off for me and my friends - and not for my nasty ex wife, due to her solicitor's big mouth. :smile-new:

Once the company is sold, and friends furnished, I can then start my homeless charity, free to help those who've found themselves without a home due to extenuating circumstances (which would have happened to me were it not for my friends).

Life's strange and the tide changes quickly, but having brilliant friends, who are there when one's family is not, is a priceless gift.

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Great story, I hope your friends appreciate it when they’ve got over the shock. Well done [emoji1360]


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