It's a gift
Inheritance tax (IHT) can be avoided where gifts are made at least seven years before death. However, it’s essential that the taxman will accept that a gift has really been made. The giver may still be exposed to IHT, income tax and capital gains tax if the gift isn’t made outright.
Say your mother gives you £100,000, and you deposit the cheque in a joint bank account which you can both access. Has she given you £100,000, half that amount or nothing?
As the bank account is held in joint names, you and your mother would each have to report half the interest arising on your separate tax returns for income tax purposes. So for income tax you effectively own half each.
However, to make an effective gift for IHT purposes, the transfer must be absolute, with no reserved benefits. If you’re both entitled to extract the full amount deposited in the account, HMRC would view your mother as having reserved the right to use the money. She would still own it all for IHT purposes, until one of you spends it or she gives up that right.
If you wish to make large gifts to save IHT in due course, you should document the gift with a letter or deed. If the gift is in the form of money it should be transferred into an account in the sole name of the recipient. If the transfer is in fact a loan, the accompanying documents should make that clear. We can help you get the paperwork right to ensure you make an effective gift.
