[Finance] Tax Advice (how exciting!)

[KZNSeagull]

The Mother-in-law is coming back to the UK from South Africa to live here permanently later in the year (she is a UK citizen). She had a long term partner over there (not married and they have now split up, hence she wants to come back) who wants to either give her a lump sum before she leaves which she will transfer over here or send her money monthly once she is over here. She is asking about any tax implications:

- will any money she brings with her be taxable?
- if her partner sends her money every month once she is here, would that be taxable?

I guess the answer is to contact HMRC to determine her domicile status (she has not lived in the UK for 40 years) and ask them, but does anyone have any idea what the likely answers would be? My inclination is that it should be no to the first question as it would be classified as her money but yes to the second as they were not married and it would be classified as income (ie not a spousal gift).

Thanks awfully in advance.

 

[swindonseagull]

If HMRC want to tax it leave it offshore and get it out from a cash machine or move on line when required.

 

[Driver8]

Provided it’s from income that has already been taxed overseas then there shouldn’t be any further tax to pay. To avoid getting in a pickle however I suggest that she speaks to an accountant for confirmation.

There is no tax on gifts whether married or otherwise.

 

[razer]

Whichever way you look at it the money is not earnings and therefore shouldn't be subject to tax. She's just bringing her SA savings to the UK

 

[Herr Tubthumper]

If HMRC want to tax it leave it offshore and get it out from a cash machine or move on line when required.

But if she lives in the UK she will be taxed on world wide income. It doesn’t matter where the money is located. Whether she chooses to declare it, is another matter of course. What does matter is whether it’s income. I don’t think it is.

 

[The Optimist]

Is there not a risk with the monthly payments that her partner might stop making them? Also if her partner died would any lump sum be written into his will?

 

[dazzer6666]

I’m a bit out of date with current rules but SA has some fairly stringent foreign exchange controls and tax rules about taking money out of the country too - may be worth checking up on those before making any decisions

 

[KZNSeagull]

Is there not a risk with the monthly payments that her partner might stop making them? Also if her partner died would any lump sum be written into his will?

Well he has given her the choice, but I have advised her to take the lump sum then it is done and dusted and she does not have to sort out any potential nasties later on.

 

[Herr Tubthumper]

Something to consider is inheritance tax. You might have an issue if the ex subsequently dies a year or two later; I think there’s specific rules about this. They might think you deliberately tried to dodge inheritance tax.

 

[Husty]

Pay your tax

 

[KZNSeagull]

Provided it’s from income that has already been taxed overseas then there shouldn’t be any further tax to pay. To avoid getting in a pickle however I suggest that she speaks to an accountant for confirmation.

There is no tax on gifts whether married or otherwise.

Yes, she is coming over for a visit next month and think she should go and clarify with an accountant when she is here. Are you sure about tax on gifts? I thought there was a 3k per annum limit?

 

[Herr Tubthumper]

Well he has given her the choice, but I have advised her to take the lump sum then it is done and dusted and she does not have to sort out any potential nasties later on.

See my point above.

 

[KZNSeagull]

I’m a bit out of date with current rules but SA has some fairly stringent foreign exchange controls and tax rules about taking money out of the country too - may be worth checking up on those before making any decisions

She has that covered - usually just requires a tax clearance certificate. Thanks.

 

[Driver8]

Something to consider is inheritance tax. You might have an issue if the ex subsequently dies a year or two later; I think there’s specific rules about this.

If her ex is South African then it will be SA inheritance tax rules not UK. Doesn’t matter where the recipient lives.

 

[KZNSeagull]

See my point above.

Yup, thanks. a trip to an accountant is required I reckon.

 

[Herr Tubthumper]

If her ex is South African then it will be SA inheritance tax rules not UK. Doesn’t matter where the recipient lives.

I must admit I don’t know how the double taxation treaty works for inheritance tax. I would not just assume this though.

 

[Herr Tubthumper]

Yup, thanks. a trip to an accountant is required I reckon.

Good luck. The good news is this sort of stuff is, from my experience, clear cut.

 

[Driver8]

Yes, she is coming over for a visit next month and think she should go and clarify with an accountant when she is here. Are you sure about tax on gifts? I thought there was a 3k per annum limit?

£3k is the annual limit for inheritance tax purposes (gifts above are generally in the estate of the person making the gift for seven years for UK domiciled people). There is no tax on making gifts and no limit (unless the asset being gifted is subject to Capital Gains Tax which it won’t be unless her ex is UK resident and gift is an asset other than cash).

 

[Driver8]

I must admit I don’t know how the double taxation treaty works for inheritance tax. I would not just assume this though.

Only UK domiciles pay UK Inheritance Tax on their estate.

 

[KZNSeagull]

£3k is the annual limit for inheritance tax purposes (gifts above are generally in the estate of the person making the gift for seven years for UK domiciled people). There is no tax on making gifts and no limit (unless the asset being gifted is subject to Capital Gains Tax which it won’t be unless her ex is UK resident and gift is an asset other than cash).

Ok, thanks. So is my advice for her to take the lump sum now, which will be subject to SA tax and other laws, the best way to do it to avoid any future problems?