David Cameron is going to tell parliament on Monday afternoon why it was completely OK for his mum to give him a load of cash — a move that could potentially save him from paying £80,000 in inheritance tax. The £200,000 gift from his mum, paid in two instalments, was made public on Sunday after Cameron published his tax returns.
Inheritance tax is paid at a rate of 40% on all the assets parents leave their children which are worth more than £325,000 when they die. Cameron’s father left him £300,000 when he died, below the threshold.
The two payments of £100,000 from his mother in May and June 2011 were “an attempt to balance out the legacy between Mr Cameron and his siblings” according to the BBC. If Cameron’s mother remains alive for another two years, under current laws the £200,000 will not be liable for inheritance tax. Had she left the sum to the Prime Minister in her will, it would have been. Gifts from a parents to a child escape the tax rate, as long as they are made seven years before their death.
If it was Cameron’s mothers intention to help Cameron avoid inheritance tax by giving him the gift, it would have been a completely legal and legitimate things to do.
In fact, the Money Advice Service, an organisation that was set up by the government to give free financial advice, even says that parents making gifts is “a good way to cut the taxman’s take.”Downing street said on Saturday that the gift was “sensible, legal and perfectly proper tax-planning.”
Cameron is confident that he has done nothing wrong and is determined to stop his opponents from making political capital from the furore, which is why he is prepared to defend his financial affairs in parliament. The Telegraph are reporting that sources have told them Cameron will “utterly refute” claims he has been able to “avoid” paying up to £80,000 in inheritance tax.
It might seem risky for a rich prime minister to defend the right of his mother to give him £100,000s tax free, but in this one specific case he could well win public support. A YouGov poll from 2015 shows that inheritance tax is the most unpopular tax with the public — even though only 3.1% of people pay it.
Labour leader Jeremy Corbyn suggested on the BBC’s Andrew Marr show yesterday that there might be a case for looking again at the inheritance tax rules. “Is there a case for looking at inheritance tax rules? Possibly.” he told Marr.
As well as telling that Commons that it’s OK for parents to gives their kids hundreds of thousands before they die, even though it means they could pay less in taxes, Cameron will also use his address today to try and convince people that he is serious about tackling financial corruption.
He will announce plans to make it a criminal offence for companies to stop their staff facilitating tax evasion.
Cameron decided to release his tax returns over the weekend after the massive leak of files from law firm Mossack Fonseca revealed information about his late father’s offshore fund Blairmore Holdings Limited. The prime minister admitted on Thursday that he and his wife once held shares in the fund.