UK Families Face £61 Million Inheritance Tax Due to Gift Rule Violations
HMRC reports that 220 gifts valued at £61 million breached inheritance tax rules in 2023-24. Families are facing unexpected tax liabilities due to non-compliance with 'gift with reservation of benefit' regulations.
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During the 2023-24 tax year, UK families incurred £61 million in inheritance tax due to 220 gifts that violated HMRC's regulations. The 'gift with reservation of benefit' rules stipulate that if the donor continues to benefit from a gifted asset, it remains part of their estate for tax purposes, incurring a 40% tax charge upon their death.
Financial experts indicate that both intentional and unintentional breaches of these rules can result in significant financial consequences for families, particularly as they may not recognize the implications of their gifting practices. The introduction of HMRC's Connect supercomputer in 2010 enhances the agency’s ability to identify such discrepancies, leading to potential investigations when estates are disputed.
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