Ordinarily gifts are handed over, thanks are expressed, and the parties move on with no further thought to any legal implications. But what if that 'present' is a large cheque or valuable item? What is the difference between a gift & a loan? It depends on the circumstances and the relationship between the donor and donee. If you are unsure, put it in writing!

A case in England involving Leonard Taylor and the executor of his late partner Doris Luker is worth noting:-

• LT and DL lived together for 15 years
• The week before she died she gave him a cheque for £61,000
• In her Will she left him her house, car and £28,000 in cash
• The residue was to be split between 2 charities

The recent £61,000 payment meant there were no residue funds and the charities decided to go to court arguing the cheque was a loan not a gift and should be repaid. At the appeal stage they won and LT faces repaying the sum AND the legal costs. It seems a harsh decision and the charities are taking a lot of flak for pursuing this. However the presumption was that in absence of evidence to the contrary the payment of money implies an obligation to repay it. A "presumption of advancement" only applies where gift is from parent to child or husband to wife (but not other way round per HMRC guidelines!) and LT and DL were not spouses. The long term loving relationship between them was not sufficient to imply the cheque was a gift.

In Scotland it is equally as important that if a donor intend a gift to be made that it is expressed in writing, however informal, and copies retained by both parties and that 'delivery' has taken place. A paper trail helps for IHT purposes too. Death bed payments in particular should be carefully documented to avoid dispute.

If you intend to give a gift of more than £250 - record the gift in writing, dated and signed by you and keep a copy with your papers. Seek legal advice, especially if there are multiple gifts /payments and / or multiple recipients. Ensure your Will is up to date to reflect your intentions.

We can advise you on the timing of gifts, the most tax efficient ways of gifting and the audit trail required. To ensure you are clear about the difference between a gift & a loan, and that your gifts are not open to challenge please contact our team.