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Where Taxpayers and Advisers Meet

Uk non-dom: transferring funds from Italy to UK

APM1
Posts:2
Joined:Fri Mar 24, 2017 2:24 pm
Uk non-dom: transferring funds from Italy to UK

Postby APM1 » Fri Mar 24, 2017 2:55 pm

Hello to everyone here at the Taxationweb forum.
It’s been a great pleasure to discover this website and find so much useful information. I hope I can one day contribute to these forums through my own experiences.

My question is about transferring funds from Italy to UK for repaying a mortgage over my flat here in London. I don't know if this is the right section of the forum, in case is not, I kindly ask to the moderators to move this discussion to the right section.

Here is the background:
- I am 36 years old, Italian born, my whole family is Italian and lives in Italy since ever. I am therefore a UK non-dom.
- I moved to London in 2007. Since then I work here in UK and pay tax here on the income from my job. I am therefore a UK tax resident.
- Last year I acquired a flat in London, with a combination of equity and loan. This where I currently live.
- I don't have any other income apart from the salary I receive here in UK from my employer.

Now, here is my question. My mother decided to donate me as a gift a flat she has in Italy. This flat has been acquired in the 80s from her. She decided to pass it on to me as a gift.

My intention is to sell this flat in Italy and transfer a portion of the proceeds from my Italian bank account to my bank account in London (approx. £500k) and thereafter repay my outstanding UK mortgage.

Now, despite I have been looking at tons of documents on the internet, is still unclear to me if I have to declare this here in UK and pay any sort of tax.

Thanks for reading and thanks in advance if you can help

AGoodman
Posts:1738
Joined:Fri May 16, 2014 3:47 pm

Re: Uk non-dom: transferring funds from Italy to UK

Postby AGoodman » Fri Mar 24, 2017 5:59 pm

There is no tax on transferring your own money to the UK, but if you sell the flat you will be liable to UK capital gains tax on any gain. You have an annual gains allowance of £11,500 (for 2017/18) and thereafter CGT would be charged at 18/28% depending on whether you are taxed at the basic or higher rate (or it straddles the two).

If you have ever lived in the flat as your main home (while spending at least 90 days in Italy during the relevant tax year) then you may be able to claim principal private residence relief against all or part of the capital gains. The relief is proportionate to the time you have lived there vs period of ownership. See HS283.

You should also get credit against UK tax for any Italian tax paid on the sale.

If the remaining UK tax is large, you could, as a non-dom, elect to be taxed on the remittance basis. This would mean that you would only pay capital gains tax on the proportion of the proceeds that you bring to the UK. However:

(a) you would pay tax on the proceeds whenever you brought them here so if you expect to remain in the UK there may be little point;
(b) you would lose your personal allowances for the year for income tax and capital gains tax; and
(c) if you have been resident in the UK for 7 of the 9 prior tax years (but less than 15), you would have to pay a £30,000 charge (increasing to £60,000 after 12 years residence) for the year you make the election.


AG

APM1
Posts:2
Joined:Fri Mar 24, 2017 2:24 pm

Re: Uk non-dom: transferring funds from Italy to UK

Postby APM1 » Fri Mar 31, 2017 3:12 pm

Many thanks AG, you have been very clear.
Can this be seen as a donation from my mother to me? In that case I believe tax implication will be softer. Is this the case?

AGoodman
Posts:1738
Joined:Fri May 16, 2014 3:47 pm

Re: Uk non-dom: transferring funds from Italy to UK

Postby AGoodman » Fri Mar 31, 2017 3:42 pm

I'm afraid I don't understand. If your mother gave you the flat in the 80s then you would be taxed (CGT) on the gain since the market value at the time of the gift. If she hasn't given it to you yet then you will receive it at the market value now so any gain (if any) on an immediate sale should be very limited.

If your mother remains the owner and sells the flat, giving you the cash, then you will not have any UK tax liabilities.

AG


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