Readers’ forum: Gifts out of income

I have been discussing with my wealthy client using the ‘normal expenditure out of income rules’ gradually to pass wealth to his children without creating a potentially exempt transfer (PET).

His income is greatly more than his outgoings and at the levels he proposes I do not think that there will be any difficult in demonstrating that the gifts were indeed made from income.

My question concerns when the relief will be first available. Suppose in year 1 he makes a gift out of income of £50 000. If he has not done that before can this be ‘normal’ expenditure or does he have to wait until a pattern has formed? Suppose that he continues to make annual gifts of £50 000. If we assume that by year 3 a pattern has been established then that £50 000 will qualify. But what about the two previous gifts: do...