[Finance] Tax Advice (how exciting!)

[Herr Tubthumper]

Only UK domiciles pay UK Inheritance Tax on their estate.

If someone has gifted money from SA to someone in the UK, and then the SA person dies, do they die with an gifted asset in the UK? It so there could be an issue.

 

[Driver8]

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?

A lump sum would appear simplest and as I said provided it’s come from savings etc that have already been taxed there shouldn’t be any further tax to pay. A quick google shows that RSM in Crawley have offices in the UK and South Africa so perhaps a call to someone like that may be a place to start. It should be pretty straightforward I think but I am an IFA not an Accountant so best check with an expert!

 

[KZNSeagull]

A lump sum would appear simplest and as I said provided it’s come from savings etc that have already been taxed there shouldn’t be any further tax to pay. A quick google shows that RSM in Crawley have offices in the UK and South Africa so perhaps a call to someone like that may be a place to start. It should be pretty straightforward I think but I am an IFA not an Accountant so best check with an expert!

Ok that's great, thanks very much!

 

[maffew]

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?

Consider exchange rate as well mate. In my time there zar ranged from less than 11 to over 18 to the gbp over 6 years. Some expats did very well out of it moving lumps sums out there. Some not so

 

[Driver8]

If someone has gifted money from SA to someone in the UK, and then the SA person dies, do they die with an gifted asset in the UK? It so there could be an issue.

No, it’s the domicile of the person making the gift that matters. I have no idea of the SA inheritance tax rules but it certainly wouldn’t be subject to UK IHT.

 

[Kazenga <3]

£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).

£3k is the annual IHT gift exemption. £325,000 is the nil-rate band for inheritance tax purposes; anything gifted over and above this in the 7 year prior to death (potentially even 14) would be a chargeable lifetime transfer and assessable for IHT.

 

[Driver8]

[QUOTE=Kazenga

Actually gifts are Potentially Exempt Transfers (PETs) not CLTs.

CLTs are if you are gifting into a relevant property trust.

In any event it is not relevant here as the person making the gift is not UK domicile.

 

[Herr Tubthumper]

No, it’s the domicile of the person making the gift that matters. I have no idea of the SA inheritance tax rules but it certainly wouldn’t be subject to UK IHT.

“When someone living outside the UK dies

If your permanent home (‘domicile’) is abroad, Inheritance Tax is only paid on your UK assets, for example property or bank accounts you have in the UK.”

This is from the HMRC website. Apologies for dwelling on this but this is something I have been looking at myself recently. I took this to be the location of the asset is the key point.

 

[Kazenga <3]

Actually gifts are Potentially Exempt Transfers (PETs) not CLTs.

CLTs are if you are gifting into a relevant property trust.

In any event it is not relevant here as the person making the gift is not UK domicile.

Confused my failed PETs and my CLTs with chargeable transfers there... it's late

 

[Driver8]

“When someone living outside the UK dies

If your permanent home (‘domicile’) is abroad, Inheritance Tax is only paid on your UK assets, for example property or bank accounts you have in the UK.”

This is from the HMRC website. Apologies for dwelling on this but this is something I have been looking at myself recently. I took this to be the location of the asset is the key point.

But in this theoretical case the person that has died ( the ex) won’t have any UK assets so no IHT would be payable.

In your case if you still have UK assets and assuming your father was British (this usually dictates where you are domiciled) you are probably still deemed domiciled in the UK so your estate would be subject to IHT on your worldwide assets.

Edit: The below explains it better than I can!


https://www.blevinsfranks.com/news/article/UK-domicile-rules-expatriates

 

[Herr Tubthumper]

But in this theoretical case the person that has died ( the ex) won’t have any UK assets so no IHT would be payable.

In your case if you still have UK assets and assuming your father was British (this usually dictates where you are domiciled) you are probably still deemed domiciled in the UK so your estate would be subject to IHT on your worldwide assets.

Edit: The below explains it better than I can!


https://www.blevinsfranks.com/news/article/UK-domicile-rules-expatriates

This post has been useful. Thank you.

 

[Driver8]

This post has been useful. Thank you.

You are welcome! Domicile is a bit of a minefield so best speak to an expert.

 

[warmleyseagull]

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.

Never mind the tax, look at the £ to rand. Old adage of don't let tax tail wag commercial dog. You could faff about getting tax right then find that SA does an Argentina….

 

[NooBHA]

There are no tax on Gifts of ''Capital''

The biggest issue in this instance is not a ''Tax Issue'' - It is a ''Money Laundering'' issue. You may need to satisfy Banks that this isn't some sort of Government Official trying to get monies out of South Africa.

It's Legal Advice she needs. Not Tax Advice - If it truly is Gifts of Capital then there is no issue for tax purposes - If someone were to come to me with that story I wouldn't touch them with the ''Proverbial Barge Pole'' and would refuse to act for them. There is just too much risk involved that the funds could be coming from an ''Non Legitimate'' source.

 

[KZNSeagull]

There are no tax on Gifts of ''Capital''

The biggest issue in this instance is not a ''Tax Issue'' - It is a ''Money Laundering'' issue. You may need to satisfy Banks that this isn't some sort of Government Official trying to get monies out of South Africa.

It's Legal Advice she needs. Not Tax Advice - If it truly is Gifts of Capital then there is no issue for tax purposes - If someone were to come to me with that story I wouldn't touch them with the ''Proverbial Barge Pole'' and would refuse to act for them. There is just too much risk involved that the funds could be coming from an ''Non Legitimate'' source.

I see what you are saying, but this shouldn't be an issue. The amounts involved will not be "government official" sized (!) and they have some sort of legal separation agreement valid under SA law so the source of any monies is easily explained to the banks. She will certainly have to prove that before the SA bank transfers anything, which she must have already done as she has already sent over a small amount to us.

 

[NooBHA]

I see what you are saying, but this shouldn't be an issue. The amounts involved will not be "government official" sized (!) and they have some sort of legal separation agreement valid under SA law so the source of any monies is easily explained to the banks. She will certainly have to prove that before the SA bank transfers anything, which she must have already done as she has already sent over a small amount to us.

Then she is fine. They are not taxable. Alimony Payments have not been taxable in the UK for about 20 years, so this is essentially just a Gift of Capital.

 

[Paulie Gualtieri]

There are no tax on Gifts of ''Capital''

The biggest issue in this instance is not a ''Tax Issue'' - It is a ''Money Laundering'' issue. You may need to satisfy Banks that this isn't some sort of Government Official trying to get monies out of South Africa.

It's Legal Advice she needs. Not Tax Advice - If it truly is Gifts of Capital then there is no issue for tax purposes - If someone were to come to me with that story I wouldn't touch them with the ''Proverbial Barge Pole'' and would refuse to act for them. There is just too much risk involved that the funds could be coming from an ''Non Legitimate'' source.

I’m a financial crime manager for a bank as my day job so this might help.

Does she have a UK bank account or does this need setting up? Alternatively is it an international account?

She will be more than likely subject to a source of funds or source of wealth investigation by the receiving bank as this (I assume) will be outside usual behaviour and her customer due diligence file will need to be updated.

Another trigger will be the fact it’s coming from SA, the risk rating of SA, typically medium or high risk dependent on institutions policy due to perceived weakness to counter money laundering and terrorist financing in their financial system.

My advise would be to call the bank before transfer, explain the situation and tel him what documentation you can supply to validate this, it maybe preferable to transfer his funds to a recognised SA law firm (who will do their own CDD on him)



Give the bank as much information as possible, they are not being difficult this is UK law, This should make things a lot smoother




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