Domicile and Gift/IHT taxes in UK

[tadhg2]

I am uk born Irish citizen, living in Ireland 10 years. 65 Y.O. Previously UK resident and employed. Tax resident and usually resident in Ireland. 3 adult kids in UK, where I lived before moving here to Ireland. The only "things" I have in the UK are my kids and a bank account with small sums in it. I receive a UK state pension. I transferred my private pension to Irish providers when we moved here through the QROPS procedures. I am living in the village of my fathers birth, among family. My wife is a Canadian citizen, born in Winnipeg, her late father Canadian.

I would like advice on the best way to transfer capital to my children, cash and/or Irish property.

I could go down the road of arguing that I am IRISH domiciled, and I think theres a pretty good case for it, however, I understand that claiming a change of domicile can become a matter of opinion, and the Revenue would have the final say. I actually DO intend staying here in Ireland, the only thing I have not done is state in my will that I want to be buried here!

If I transfer money to my wife and have her give money to my children will that be regarded as a gift from a non-domiciled individual and therefore be exempt from UK Tax?

Now lets think about dying! If I go first she can leave the estate to my kids UK tax exempt since she is a UK non dom? (Irish IHT is less onerous in regard to children and step children).

If she goes first then I have to fall back on the claim to be Irish domiciled myself, is that correct? Any thoughts as to whether a claim that I am Irish domicled is liely to fly? Thanks Tadhg2

[pawncob]

Firstly, establish your domicile by prepaying a funeral plan in Eire and add a codicil to your will.

Any gifts to UK citizens are exempt from UK tax.

[AGoodman]

It sounds as though you have a pretty good claim to an Irish domicile of choice. The strength will increase with each year that passes.

You are settled in/retired to Ireland and have your own home there. You've moved your pension and wealth there.

The most important factor is that you intend to remain there permanently (the actual test) and all the evidence you have mentioned points that way. If you do in fact remain there and (one day in the far future) die there, it would be extremely difficult for HMRC to challenge - not least because your executors would be acting reasonably taking that position and therefore would have no obligation to file a UK return. Even if HMRC did take issue, they are not the final arbiters as you can always appeal and they would be loath to run a case with no evidence that you intended to return.

It would be worth you writing out your connections to your new home and personal/family history on a piece of paper in case your family do not have the details when the time comes.

The main risk is that your health fails and you move back to the UK to be near your children and see out your days here. That would render you UK dom again but comes under the category of decisions that are more important than tax.

Finally, if your father had a domicile of origin in Ireland, it is also possible that you also have an Irish domicile of choice inherited from him which has revived. Just a technicality really. It would depend on his position when you were born (i.e. was he in Ireland or in the UK but still intending to return to Ireland).

[maths]

The start point is to identify your domicile of origin i.e. the domicile you acquired at birth. If you were legitimate then you take the domicile of your father at that time; otherwise, you take your mother's domicile at that time.

If you acquired an Irish domicile at birth, then on moving to Ireland and intending to remain there indefinitely your Irish domicile resurrected (if you had in the meantime acquired a UK domicile of choice).

If however you acquired a UK domicile of origin then to establish an Irish domicile now requires you to establish you have acquired an Irish domicile of choice.

Under either option you appear to have a good case that one way or another you now possess an Irish domicile (be it origin or choice).

Assuming this, then no UK IHT liability will arise on lifetime gifts or on death assuming no UK situs assets (in which case the UK nil rate band may apply).

If you married pre 1 January 1974 your non-UK domiciled wife may have at that time acquired a domicile of dependence which would be your domicile at that time.

On AG's point re returning to the UK due to ill health the issue is not as clear cut as he perhaps suggests although any return to the UK would not generally be advisable.

[tadhg2]

Thanks for the helpful comments. My wife was previously married in Canada and lived 20 years in the UK and divorced. We married in Ireland in our local church here in Ireland in 2002. My first wife (English, mother to my children) passed away in 2000. I believe that neither of us is UK domiciled (her by Origin, me by Choice) ...any further comments? Does enyone know if I would be liable for tax in Ireland on giving away or leaving through a will monies or property?
Thanks once more