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Where Taxpayers and Advisers Meet

Cross-gifting money from non-dom untaxed offshore funds

marsor
Posts:3
Joined:Sun May 14, 2017 6:46 pm
Cross-gifting money from non-dom untaxed offshore funds

Postby marsor » Wed Jun 28, 2017 8:34 pm

Hi,

I am a non-dom (though by now taxed on arising basis) and have untaxed funds offshore that I cannot remit without incurring income tax.

I am aware that I cannot lend onshore against the offshore funds, not even purely as collateral (since 2014) and definitely not as source for repayment which makes sense.

However, I am wondering about the use of gifts in the following construct:
- A non-UK close family member gifts me money into the UK without recourse or any conditions attached
- Over time, I gift money back from my offshore funds (staying offshore), again without any conditions attached

Does anybody have an idea or experience what view HMRC would take on this structure? In my view this does not constitute a loan and should not incur tax based on any remittance.
- The gifts would be completely unconditional and delayed to each other. At any time I could chose to not gift money back to my family member without any (legal/financial) consequences whatsoever
- This structure would of course have negative inheritance tax implications for both of us, which would need to be considered separately

Thanks!

bd6759
Posts:4262
Joined:Sat Feb 01, 2014 3:26 pm

Re: Cross-gifting money from non-dom untaxed offshore funds

Postby bd6759 » Thu Jun 29, 2017 7:57 am

It's a sham and would be challenged as such.

maths
Posts:8507
Joined:Wed Aug 06, 2008 3:25 pm

Re: Cross-gifting money from non-dom untaxed offshore funds

Postby maths » Thu Jun 29, 2017 4:30 pm

Almost certainly a remittance will arise under ITA 2007 s809L(4) and/or 809L(5).

marsor
Posts:3
Joined:Sun May 14, 2017 6:46 pm

Re: Cross-gifting money from non-dom untaxed offshore funds

Postby marsor » Fri Jun 30, 2017 6:55 pm

Many thanks both, that's helpful (and expected).

My situation is actually that I'm looking to buy a property onshore and my offshore close family member, will support my downpayment through gifted money (which should be completely uncontroversial to my understanding) in the ~100k-range.

Now I'm wondering what happens if I ever gift him money back (as I've done in the past, e.g., paying for holidays, etc) - not in the same dimension and not in the same timeframe. Obviously, I would pay for that from my offshore money (as I've done in the past).

I could understand HMRC's view that direct return gifting would constitute a derived/connected operation and therefore a remittance. However, it surely cannot be that due to his gift, I can never again transfer money back on any occasion.

Does anybody know what rules/experience HMRC would apply to differentiate a connected payment from a non-connected? Would I have the burden of proof or them? I want to make sure that accepting support for the purchase doesn't restrict me later.

Thanks again!

bd6759
Posts:4262
Joined:Sat Feb 01, 2014 3:26 pm

Re: Cross-gifting money from non-dom untaxed offshore funds

Postby bd6759 » Sat Jul 01, 2017 12:00 pm

Why not simply remit your offshore money and buy the property instead of trying to contrive some made up gift scheme?

marso
Posts:2
Joined:Sun Jun 04, 2017 8:40 am

Re: Cross-gifting money from non-dom untaxed offshore funds

Postby marso » Sat Jul 01, 2017 1:09 pm

Because of taxes obviously. All my offshore accounts are mixed funds and hence would be taxed at my marginal income tax rate.

Also, I realise that given the way I asked the initial question nobody will believe me this anymore (but that was partially on purpose) but I'm not trying to make up an evasion scheme. I am actually buying a property and I will get gifted support from a close relative.

What I am worried about is that HMRC will take a similar view as you seem to do for any (unconnected) future transactions I might have. We have offshore funds going around in our family all the time (if not in the dimension this gift would be). So, I'm wondering what measures to take (if any) now or later to make sure HMRC wouldn't deduct a connection and hence a remittance.

Would very much appreciate any experience, cases, guidelines, ideas... Thanks!


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