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Author Topic: Tax question  (Read 2499 times)

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D

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Tax question
« on: 02 January 2016, 15:11:29 »

Friend of mine asked me today and I have no idea. She/husband are long term UK residents but not citizens as such. She/her husband are in the process of buying a house in the UK and her parents have agreed to help with part of the deposit. Said parents are non UK citizens and live outside the UK. I understand that the amount that the parents are helping with is between 20-40k. A long term loan from parents with no interest and payments as and when possible.

So question is: Is this amount taxable if sent as a gift to the above couple? I wouldn't have thought so as it has been earned by a foreign citizen in a foreign country. Any ideas or websites I could direct him to?
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05omegav6

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Re: Tax question
« Reply #1 on: 02 January 2016, 18:08:35 »

Hmrc/.Gov  might be of use :-\
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Andy H

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Re: Tax question
« Reply #2 on: 02 January 2016, 18:49:41 »

I don't know about the tax situation but what surprised me last time we moved house was the anti money laundering regulations.

This article on the law society website https://www.lawsociety.org.uk/support-services/advice/articles/source-of-funds-clean-or-consistent-risk/ seems to say that the onus is on the solicitors to satisfy themselves that you are not using criminal/drug/terrorist money.

Depending how complex your friends & their parents situation is they might find that their solicitor may ask for documentation to cover the solicitor's backsides before going through with the purchase.
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Lazydocker

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Re: Tax question
« Reply #3 on: 02 January 2016, 21:53:21 »

As Andy said, the Anti-money laundering is where they could stumble... Why not get the parents to pay direct to the solicitors
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Kevin Wood

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Re: Tax question
« Reply #4 on: 02 January 2016, 23:12:02 »

A gift would only attract taxation if both parents don't survive the transaction by 7 years, and given that they would be paying it back, I guess it could be reduced by the amount of any repayments made, but you'd need to get a agreement drawn up and records kept of any payments so you can demonstrate this should the unthinkable happen.

The tax burden is on the recipient, so I can't see the parents being overseas making any odds but I'm not an expert.

As said, the solicitor will want to see evidence of this arrangement for money laundering legislation.
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LC0112G

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Re: Tax question
« Reply #5 on: 02 January 2016, 23:17:57 »

Under UK law there is no tax payable on gifts. It doesn't matter who the gift is from or to. However this may not be true for residents in a foreign jurisdiction (i.e. the parents) I've recently read that the French for instance have a 50% tax on cash gifts between family members. So your friends would have to check the rules that exist in Switzerland.

The bigger problem will be mortgage. The bank/building society will NOT accept the parents money as part of any deposit unless it is classed as a "gift without reservation". That means it must be a no strings attached gift - and not any kind of loan with the intention to re-pay it in the future. The parents will be asked to sign a form to say they don't expect any monies to be re-paid. If the bank, or a solicitor, find out that there is any intention to repay the "gift" then the mortgage offer will be withdrawn. If they say the wrong thing then alarm bells will ring and they could be guilty of mortgage fraud.
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Re: Tax question
« Reply #6 on: 03 January 2016, 01:41:30 »

Under UK law there is no tax payable on gifts. It doesn't matter who the gift is from or to. However this may not be true for residents in a foreign jurisdiction (i.e. the parents) I've recently read that the French for instance have a 50% tax on cash gifts between family members. So your friends would have to check the rules that exist in Switzerland.

The bigger problem will be mortgage. The bank/building society will NOT accept the parents money as part of any deposit unless it is classed as a "gift without reservation". That means it must be a no strings attached gift - and not any kind of loan with the intention to re-pay it in the future. The parents will be asked to sign a form to say they don't expect any monies to be re-paid. If the bank, or a solicitor, find out that there is any intention to repay the "gift" then the mortgage offer will be withdrawn. If they say the wrong thing then alarm bells will ring and they could be guilty of mortgage fraud.

This is not true - Ask me how I know!
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Re: Tax question
« Reply #7 on: 03 January 2016, 08:34:14 »

Anything in the UK, over 20k attracts attention from hmrc,
 way to avoid, get vendor to take house off market, re-advertise at a lower price, and give the vendor the cash, in small amounts, bout £4.5k, . Smaller transactions' aren't as visible,so don't flag up.

The above is no use to the op, as soon as 20k+ is transferred, it is flagged up automatically,as a large financial transfer, hmrc be looking.

 Now if you were looking to buy a 25ft caravan to tow behind your new transit(ladders on roof), nobody would say a word.
« Last Edit: 03 January 2016, 08:50:06 by biggriffin »
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LC0112G

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Re: Tax question
« Reply #8 on: 03 January 2016, 14:50:07 »

Under UK law there is no tax payable on gifts. It doesn't matter who the gift is from or to. However this may not be true for residents in a foreign jurisdiction (i.e. the parents) I've recently read that the French for instance have a 50% tax on cash gifts between family members. So your friends would have to check the rules that exist in Switzerland.

The bigger problem will be mortgage. The bank/building society will NOT accept the parents money as part of any deposit unless it is classed as a "gift without reservation". That means it must be a no strings attached gift - and not any kind of loan with the intention to re-pay it in the future. The parents will be asked to sign a form to say they don't expect any monies to be re-paid. If the bank, or a solicitor, find out that there is any intention to repay the "gift" then the mortgage offer will be withdrawn. If they say the wrong thing then alarm bells will ring and they could be guilty of mortgage fraud.

This is not true - Ask me how I know!

It IS true. Neither the gifter nor the receiver need to pay any UK tax on any cash gift. at the time of the gift.

What Kevin was referring to is potential inheritance tax liability. If the (UK tax domociled) gifter dies within 7 year of the gift then the value of that gift is included in their estate, and if the value of their estate exceeds the inheritance tax limits then the estate must pay the inheritance tax. However, in this instance, the gifter is a Swiss resident, so UK law has no baring on the gifter. Swiss law might though.

The only other thing to beware of (for a UK gifter) is intentional deprivation of assets which has no time limit. You cannot give away your assets and then throw yourself on the mercy of the state to pay for old age care home fees etc.

If you disagree with the above, please state why, and how it affects this case.
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LC0112G

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Re: Tax question
« Reply #9 on: 03 January 2016, 15:02:31 »

Anything in the UK, over 20k attracts attention from hmrc,
 way to avoid, get vendor to take house off market, re-advertise at a lower price, and give the vendor the cash, in small amounts, bout £4.5k, . Smaller transactions' aren't as visible,so don't flag up.

Any competent solicitor will spot this a mile off. And there are lots of other ways to end up in prison for tax evasion or mortgage fraud too:o

Getting the money from Swizerland to the UK may attract HMRC attention, but providing it's coming from a legitimate source and via recognised bank accounts, there will be no problems and no UK tax to pay. But, the conversation in the solicitors office will then go something like...

Customer) I'm buying a new house, will you be my conveyance/solicitor/
Solicitor) Sure I will. Where are you getting the deposit from?
Customer) My parents are giving me the money
Solicitor) I need your parents to sign a form saying this is a true gift without reservation - meaning your parents never want the money back.
Customer) Errr.....
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Marks DTM Calib

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Re: Tax question
« Reply #10 on: 03 January 2016, 20:54:26 »

Under UK law there is no tax payable on gifts. It doesn't matter who the gift is from or to. However this may not be true for residents in a foreign jurisdiction (i.e. the parents) I've recently read that the French for instance have a 50% tax on cash gifts between family members. So your friends would have to check the rules that exist in Switzerland.

The bigger problem will be mortgage. The bank/building society will NOT accept the parents money as part of any deposit unless it is classed as a "gift without reservation". That means it must be a no strings attached gift - and not any kind of loan with the intention to re-pay it in the future. The parents will be asked to sign a form to say they don't expect any monies to be re-paid. If the bank, or a solicitor, find out that there is any intention to repay the "gift" then the mortgage offer will be withdrawn. If they say the wrong thing then alarm bells will ring and they could be guilty of mortgage fraud.

This is not true - Ask me how I know!

It IS true. Neither the gifter nor the receiver need to pay any UK tax on any cash gift. at the time of the gift.

What Kevin was referring to is potential inheritance tax liability. If the (UK tax domociled) gifter dies within 7 year of the gift then the value of that gift is included in their estate, and if the value of their estate exceeds the inheritance tax limits then the estate must pay the inheritance tax. However, in this instance, the gifter is a Swiss resident, so UK law has no baring on the gifter. Swiss law might though.

The only other thing to beware of (for a UK gifter) is intentional deprivation of assets which has no time limit. You cannot give away your assets and then throw yourself on the mercy of the state to pay for old age care home fees etc.

If you disagree with the above, please state why, and how it affects this case.

Labour got rid of the seven year rule years as ago......there is now no time limit
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henryd

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Re: Tax question
« Reply #11 on: 03 January 2016, 21:28:48 »

Under UK law there is no tax payable on gifts. It doesn't matter who the gift is from or to. However this may not be true for residents in a foreign jurisdiction (i.e. the parents) I've recently read that the French for instance have a 50% tax on cash gifts between family members. So your friends would have to check the rules that exist in Switzerland.

The bigger problem will be mortgage. The bank/building society will NOT accept the parents money as part of any deposit unless it is classed as a "gift without reservation". That means it must be a no strings attached gift - and not any kind of loan with the intention to re-pay it in the future. The parents will be asked to sign a form to say they don't expect any monies to be re-paid. If the bank, or a solicitor, find out that there is any intention to repay the "gift" then the mortgage offer will be withdrawn. If they say the wrong thing then alarm bells will ring and they could be guilty of mortgage fraud.

This is not true - Ask me how I know!

It IS true. Neither the gifter nor the receiver need to pay any UK tax on any cash gift. at the time of the gift.

What Kevin was referring to is potential inheritance tax liability. If the (UK tax domociled) gifter dies within 7 year of the gift then the value of that gift is included in their estate, and if the value of their estate exceeds the inheritance tax limits then the estate must pay the inheritance tax. However, in this instance, the gifter is a Swiss resident, so UK law has no baring on the gifter. Swiss law might though.

The only other thing to beware of (for a UK gifter) is intentional deprivation of assets which has no time limit. You cannot give away your assets and then throw yourself on the mercy of the state to pay for old age care home fees etc.

If you disagree with the above, please state why, and how it affects this case.

Labour got rid of the seven year rule years as ago......there is now no time limit

Panto mode on   Oh yes there is :y

https://www.gov.uk/inheritance-tax/gifts
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Marks DTM Calib

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Re: Tax question
« Reply #12 on: 04 January 2016, 10:22:07 »

That's inheritance, check out what happens if they go into a home...........the government can look to recover the full amount to cover costs  :y
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LC0112G

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Re: Tax question
« Reply #13 on: 04 January 2016, 14:54:28 »

That's inheritance, check out what happens if they go into a home...........the government can look to recover the full amount to cover costs  :y

Yes - but - it's not a tax, it's not levied on the receiver of the gift, and it's not relevant (from a UK point of view at least) if the gifter is not resident in the UK. So in no way relevant to the OP's question.

It's intentional deprivation of assets, and the government guidance is...

Quote
The statutory guidance in support of the Care Act 2014, states that deprivation of assets is where a person has intentionally deprived or decreased their overall assets in order to reduce the amount they will be charged towards their care and support. This means that they must have known that they would need care and support and have reduced their assets in order to reduce the contribution they would be asked to make towards the cost of it.


http://www.ageuk.org.uk/Documents/EN-GB/Factsheets/FS40_deprivation_of_assets_in_the_means_test_for_care_home_provision_fcs.pdf?dtrk=true

So providing the gift is given before the gifter is aware they need tax payer funded support, there is no reason for the money to be recovered. And it's not the Government that recovers the money either - it's the local authority/council. However, there is NO time limit on it - people often mistakenly believe the 7 year limit applies - it doesn't.
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