This site uses cookies. By continuing to browse the site you are agreeing to our use of cookies. To find out more about cookies on this website and how to delete cookies, see our Cookie Policy.
Analytics

Tools which collect anonymous data to enable us to see how visitors use our site and how it performs. We use this to improve our products, services and user experience.

Essential

Tools that enable essential services and functionality, including identity verification, service continuity and site security.

Where Taxpayers and Advisers Meet

UK Domiciled?/Property Overseas / gifting property

cook1
Posts:17
Joined:Wed Aug 06, 2008 3:30 pm
UK Domiciled?/Property Overseas / gifting property

Postby cook1 » Sat May 13, 2017 10:54 am

My query relates to my mother. We are questioning whether she is deemed UK domiciled or not due to a sad change in circumstances.
My mum has been living in the Czech Republic since August 2003 when she retired at 60.
She has a Czech permit, permitting her to reside in CZ Rep as an EU citizen.
She has a British passport.
She has a signed S1 for reciprocal healthcare.
She owns an apartment in the Czech Republic. No property in the U.K. although she does retain her UK bank account for all her finances.
I am her only family tie. I am a UK resident.

My mum came over mid December 2016 for Christmas and the New Year but unfortunately became seriously unwell and was admitted to hospital and unable to return home as planned on 5 Jan 2017. She has been in and out of hospital and now requires treatment for an aggressive tumour; she would not be well enough to go home alone at present. Her intention as to whether to stay in the U.K. or not will depend on her treatment outcome. She is currently staying with my partner and me during her treatment.

We assess that up until this unexpected stay she was not a UK resident/UK domiciled. She does visit for holidays but less than 90 days per year.

Her apartment was purchased in 2006 at a U.K. equivalent of £30,000. It has not increased in value much beyond that, the main gain currently would be due to stronger CZ crown against sterling.

She is thinking she will either sell , or gift the apartment to me as she possibly thinks she will be staying with us and would not be able to afford living anywhere else.

Questions:
1. Would she now be deemed UK resident / domiciled in view of her time here, or would the current situation be deemed exceptional circumstances?
2. If she remains non U.K. Domiciled what are the implications of gifting her apartment to me?
3. If she is UK domiciled, again what are the implications of gifting her apartment to me. We assess that if she were not to survive 7 years the gift would go into her estate for IHT purposes, or would there be tax regardless of her estate value.
4. We need advise on whether we need a U.K. Will or a will drawn up in the Czech Republic, who would be best to advise on this?

We are happy to take official advise but would need guidance on the type of the tax advisor or solicitor we might require.
Your expertise is appreciated. Thank you.

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

Re: UK Domiciled?/Property Overseas / gifting property

Postby AGoodman » Tue May 23, 2017 7:39 pm

Your mother has a fair claim to having acquired a domicile of choice in the Czech Republic - the contra points being her use of a UK account for her finances and, particularly, what sounds like regular visits back to the UK. Two weeks pa might be risky but explained if she was visiting you, 2 months would probably cause some problems.

If she does have a Czech domicile, staying in the UK for urgent medical care should not cause her to lose it but as soon as she forms the view that she will be staying in the UK for the rest of her days (and disposing of her apartment is evidence of this), she will revert to her UK domicile of origin.

If she is or becomes UK domiciled then the CGT on a sale or gift will be the same - a gift would be treated as a disposal at market value. However, if she has lived in the property as her main home during the entire ownership (excepting the last 18 months), it will be covered by 100% PPR relief and no UK tax will be payable. You would need to check the Czech position.

Again, if she is or becomes UK domiciled then a gift would be a PET and brought into her estate for IHT if she failed to survive 7 years. Remember that she has a NRB of £325,000 and possibly a further £325,000 if she is a widow and her late husband left everything to her. She could also benefit from the new residential nil rate band up to the value of the property. This could be £680,000 in total before any IHT was payable.

A UK will would be wise to cover her UK estate (this is acceptable as she is a UK national) but you would need to check the Czech position locally. An English will should be accepted there under the EU Succession Directive - either because she is habitually resident in the UK or (if not) she could elect for English law to apply under her will. However, in practice, a local will may make life much simpler if one is necessary - avoiding the need for notarised translations etc. It wouldn't be needed if she has divested herself of all Czech assets or if the intestate rules there would have the desired effect. Overall, once she makes the decision that she has left the Czech Republic, it may well make sense to divest her assets there for any number of reasons.

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

Re: UK Domiciled?/Property Overseas / gifting property

Postby maths » Wed May 24, 2017 3:52 pm

It seems highly likely that UK inheritance will not be a problem whether mother has, or will, re-acquire under common law her presumed UK domicile of origin or whether her current non-UK domicile of choice (ie Czech) persists. This is based on the assumption that her worldwide estate falls below £325,000 (or possibly £650,000). However, under proposed new domicile rules for UK tax purposes she may find in any event find herself deemed UK domicile for all UK tax purposes within her first tax year of residence eg 2017/18.

What is the size of her worldwide estate?

UK capital gains tax also seems not to be a problem whether she makes a lifetime gift of her overseas property (in which she presumably lived) or leaves it by will (irrespective of her domicile or deemed domicile status).

If there any potential adverse tax issues they are more likely to be in Czech Republic not UK.

Probably better to draw up a will under Czech law to deal with her Czech real estate and at the same time her personal Czech property with UK will for UK assets.

cook1
Posts:17
Joined:Wed Aug 06, 2008 3:30 pm

Re: UK Domiciled?/Property Overseas / gifting property

Postby cook1 » Fri May 26, 2017 8:29 am

Many thanks Maths and AGoodman for your responses. That all makes sense.p and I appreciate your assistance. Maths my mother's assets are under £100k so IHT not a consideration.
Regards
Anna


Return to “Inheritance Tax, IHT, Trusts & Estates, Capital Taxes”