Being bought a car as a gift

We’re lucky enough to receive the offer from my F-I-L to pay for a new (second-hand) car. The purpose of the car is two-fold – a runabout for me as the main driver (my other car is a camper so not as practical for day to day use), and for my daughter and subsequent kids to learn to drive in and also use as named drivers (there won’t be an issue with insurance fronting as I will use it most days).

Target car value is c. £10k (1.0L, 60 bhp Skoda Fabia) so in terms of buying the car I see we could either get money gifted and I buy it myself, but that money is / could be subject to tax – not sure who pays the tax the gifter or receiver.

OR

FIL could buy the car outright and change us to owner / keeper via v5c transfer of ownership. Of course this way there would need to be some additional insurance policies, tax changing and extra admin hassle.

Any thoughts or experience on the smartest way to go about this?

Should be fine gifting money unless FIL is likely to kick the bucket in next 6 or so years. Same with gifting a car.

I don’t see why there would be any tax liabilities unless he dies within the next 7 years and there is some inheritance tax due.

So the annual £3k limit is tax free regardless of when the person dies? And over that limit may result in tax being paid if the person dies within seven years of the gift being made?

If he didn’t use his gift allowance last year I believe it can be rolled over into this year so would be £6000.

Just get him to buy and sell it to you for a quid.  It’s a private sale.

FIL could buy the car outright and change us to owner / keeper via v5c transfer of ownership.

ownership and being the registered keeper are not the same thing. If your FIL buys the car he can put any name / address he like on the V5 as part of that transaction – there doesnt need to be a further change of V5

Delete

Just get him to buy and sell it to you for a quid.  It’s a private sale.

Do…do you really think that’s something HMRC hasn’t thought of?

I mean, back in the real world it’s unlikely that HMRC (or an executor) would detect the buying and giving away of the car, but if they do, having entered into a sham transaction won’t help anything.

So does he want money for it, or are you being given it?

Either way, I don’t see why there would be tax to pay.

Do the HMRC really have enough staff to keep track of every transaction/deceased estates finances?

Get the £10k but buy a £1k snotter instead that the kids can happily handbrake round a Maccys car park, then blow the rest on coke and hookers whilst tossing two fingers to HMRC

If you have a spouse he can give you both 6k with no possible IHT liability using the carry-over from last year. Cash or car makes no odds. Spouse can then give you the money free of any liability.

Of course no-one keeps track of the IHT liability for such marginal cases though it would in principle be fraud on your part if he kicks the bucket and you don’t account for it properly. And it only matters at all if he’s over the IHT threshold which is only a very small proportion of the richest few (4% of estates).

The annual gift allowance for a person is £3K.

There are three of you so that is £9K.

You can also use previous years allowances.

I suggest you choose the car, he pays for it and you register it in your name. That should be the end of it

However, if the tax man comes calling, explain that it was a £3K gift to each of you and then the rest was from the previous years allowance.

No harm, no foul.

Thanks y’all. Probably gonna need another 10 large for insurance when she passes her test.

I think a lot would have to do with the total value of the estate when the F.i.l. dies…

If it’s less than say, a million quid it’s simply a form filling/rubber stamp excersise. If the value of the estate is less than say, £750k, there won’t be any tax due, and HMRC won’t give a crap about figuring out who really paid for that 10k car…

… if the car was 1955 Mercedes-Benz 300 SLR Uhlenhaut Coupé, on the other hand…

Presumably the F.i.L has a will, this is part of why it’s important to get a will written properly…aside from who gets what, things like this can be straight forward rather than a mine field,  and why it’s important to get advice rather a boiler-plate will.

And will prevent any in-fighting, such as party A saying, party B got a free 10k car ‘under the table’! not fair! etc, etc.

My BIL did the same (although he bought 6 cars for family members! …. Don’t ask)

He just paid for ours and put us on the v5 so it’s ours, no transfer between him and us took place.

He was a CFO and accountant before he retired and knows his stuff.

Do the HMRC really have enough staff

No.

But as above, that’s moot since it’s a shared gift and everyone has an allowance.

He just paid for ours and put us on the v5 so it’s ours, no transfer between him and us took place

Strictly speaking, it’s not yours. V5 is not ownership. If no transfer of anything took place, then he’s still the owner, you’re the registered keeper.

Unless it was explicitly given to you as a gift, which I imagine it was. But even then, I think I’d still want something written down just in case.

He just paid for ours and put us on the v5 so it’s ours, no transfer between him and us took place.

I don’t think you appearing on the V5 makes you the owner, just the registered keeper.

as others have said, £3K in gifts is exempt anyway (plus you can backdate by a year)

In addition (and current rules only, who knows if the Gov will scrap this pre-election) the IHT threshold is £325K PLUS £175K extra if the estate includes property, and if the first spouse leaves to the second that carries over as well so that can be £650K up to £1M before you start paying IHT.

If you’re above that and get caught for a £10K car gift and have to pay some tax on it, then pay it out of the £1M you can get tax free and stop being a tight arse ;-)