UK and non-UK resident case

[shakir]

Hi, I’m not sure if such a case has been discussed on this forum earlier. I am a non UK Resident and have never worked nor been a tax payer in UK, my wife and 3 Children are UK residents for the last 6 years although my wife isn’t a tax payer as she doesn’t work or have any other income in UK. She does have some funds in a joint savings account overseas in the country she migrated from on which there is small interest income but the actual beneficiary of that income is myself as I am the joint account holder. My questions are as follows:

1. Does she need to submit an annual tax return in UK?
2. Since I regularly remit funds to her in UK for general family expenses, does that construe as an income on her and would it be taxable in the UK? Note that funds that I remit are already taxed in my home country.
3. The funds my wife has in her overseas savings account were gifted to her by her mother over 10 years ago (her mother is still alive and lives overseas) and part of those funds she has brought into the UK and kept in a savings account which bears a negligible interest. What are the tax implications on the funds she moved from overseas to the UK and on the small interest income she has in UK on these funds? Part of the funds are still overseas, do these need to be declared to HMRC under the new overseas wealth declaration law that comes into effect in October this year? If so, what is the procedure for this declaration?

[AGoodman]

She will generally be considered to be receiving 50% of the interest of a joint account.

If she has no other income then she can earn interest of at least £11,850 (her personal allowance) without any tax liability or obligation to file a return. I say at least because there is also the savings allowance and starting rate for savings.

Transfers from you are not income, they are gifts so no tax obligations.

Simply bringing funds to the UK does not create a tax liability, save in more complicated scenarios where the individual is taxed on the remittance basis and the funds would have been taxable if in the UK. It doesn't sound like those rules apply here.

No need to make a declaration of UK or foreign wealth if she has met her tax obligations. As mentioned above, it sounds like she has.

[shakir]

Thank you very much for your very informative reply, very much appreciated. It is quite in line with a similar advice I had received through a consultation with a tax advisor a while back. One more thing that’s been on my mind is if I were to transfer funds to my children who are all over 18 years, would this be seen as an income to them or still be seen as a gift from non resident non domiciled person to them hence not taxable?

Also please advise if I added the names of my children into my UK bank account, would there be any tax implication on this?

[AGoodman]

Gifts are not income

If your children become joint holders of your account (I suspect it would have to be a new account), the default position is that you are equal joint owners. They would be subject to income tax on an equal share of the interest. For IHT, adding them would amount to a gift of a share from you to them and any additions you make to the account would also be treated as gifts to them in the relevant shares.

[shakir]

Thanks again, is there a limit to the amount I can gift to my children in the above method without being subject to income tax or IHT?

[AGoodman]

Gifts are not income

Gifts made to individuals are only considered for IHT if you make them in the seven years prior to your death. Then they become chargeable but are first set against the nil rate band so would only be subject to tax if the total gifts over the 7 years were greater than at least £325,000. They can however have a knock on effect because they reduce the nil rate band that could otherwise be used against other estate assets.