'How my father dodged £600k in death duties' and other tax tips from Telegraph readers 

Woman's hand holding wrapped gift
It is possible to gift huge sums to avoid inheritance tax Credit: Getty Images Contributor

In last week’s column on using gifts “out of income” to cut death duties, I ventured to ask you to share any of your own IHT victories. You did not disappoint.

If email inboxes could bulge, mine would be bursting at the seams.

I was expecting perhaps a couple of anecdotes – instead I’ve been overwhelmed with tales of superhuman planning and shrewd understanding of rules that make most people go cross-eyed.

So varied and ingenious were your responses, they warrant being shared, anonymously of course – we don’t want to be the reason HMRC comes a‑knocking.

Firstly it’s worth pointing out, as many readers did, that of course it is impossible to know if victory over the taxman has been secured until you’re pushing up daisies.

As one reader, AM, said: “Negotiations about how much IHT your estate will pay will be between HMRC and your executors – how investigative or vindictive it will be, and how competent your executors will be, is beyond your control”.

More practically, being able to evidence the regularity of gift giving is important, which makes detailed, consistent and accurate record-keeping essential.

Frustratingly, the Revenue does not pre-approve gifts or the use of exemptions.

Yet there is much to learn from others’ successful application of the various quirks of the regime. Acting on behalf of his mother, AT managed to exploit several loopholes and deflate her estate’s bill.

Apart from using gifts out of income and keeping detailed records, he managed a portfolio of Aim stocks, those listed on London’s junior market, which qualify for “business relief” and can thus receive full relief from death duties.

Since 2013 it has been possible to hold Aim shares within Isas, making them incredibly tax-efficient. In addition, a forestry investment and property company (which crucially he could prove had a trading history) were both written off for IHT purposes.

But how to prove that gifts out of income are such that you are able to “maintain your standard of living after making the gift”, as per the Government’s guidelines?

MK had a simple suggestion.

He retired at 60 and lived off his final salary pension. When he reached 65 the state pension kicked in and he began to make gifts out of this new income stream in addition to the usual £3,000 allowance. It was clear that this had no detriment to his standard of living; after all he’d survived very nicely without it.

A couple who adopted the same strategy today could pass on roughly £23,000 a year, assuming they both qualified for the full state pension. The only snag is that state pension age rises mean today you’d have to wait a few extra years to start.

RB’s father managed to pass on a huge sum in gifts, made every three months or so once surplus income had been collected. By the time of his death, at 94 years and 363 days, £600,000 had been passed on. The key?

“He paid for everything by cheque or direct debit and kept all his cheque stubs and every bank statement.”

Finally, PC wanted to alert readers to complications if you make gifts on behalf of someone else under “power of attorney” arrangements. Permission must be sought from the Court of Protection.