tax on money gifted

john beagley · Postby **john beagley** » Thu Oct 12, 2006 2:52 am

I have a client with a wealthy friend who is minded to give him a share of a windfall.He is concerned at what might happen if a large sum of money suddenly appears in his bank account and is asking whether he should open an offshore account.

King_Maker · Postby **King_Maker** » Thu Oct 12, 2006 3:25 am

Are you concerned with the tax implications, or money laundering regulations?

john beagley · Postby **john beagley** » Thu Oct 12, 2006 3:28 am

only tax implications

King_Maker · Postby **King_Maker** » Thu Oct 12, 2006 3:38 am

Assuming UK domicile, residence etc, and that the "windfall" is cash, the donor may have an IHT liability, but the donee (your client)should not have any tax liability.

Opening an off-shore acccount would be a matter of personal choice.

It would be prudent to fully document the gift to satisfy any HMRC enquiry at a later date.

Taxbar · Postby **Taxbar** » Thu Oct 12, 2006 6:14 am

As stated the gift is subject to IHT as a PET if the Donor dies within 7 years.

It would be prudent for large sums to get 7yr reducing term assurance.

The gift should be made with a formal deed of gift to avoid any questions.

An offshore account when not declared for tax is tax evasion and so of no benefit.

Daniel Feingold
STP
info@straxax.co.uk

wamstax · Postby **wamstax** » Thu Oct 12, 2006 2:22 pm

The donor's position is as stated above if he is UK domiciled etc. If however the donor is not resident or domiciled in the UK then your client might have a few awkward questions to answer when the interest on the monies invested or capital put into any project materialises to HMRC's eyes. I would suggest that matters are fully and contemporaneously documented for any future enquiries.

It would also be worthwhile to consider if your client could by any stretch of the imagination be taxable under Case V1 SchD on his receipt as an "other profit or gain". To ensure that the matter is put "safe" for the future I would after such consideration enter a full report of the details, amounts, descriptions, parties and dates in your client's SA return. He should be notifying his chargeability on any interest income if he hasn't previously had SA returns.
If there are other considerations or matters to be thought about - and I do not encourage offshore accounts (see my website http://www.wamstaxltd.com/offshore_banking.html ) then I would be happy to help on a professional basis
Regards
Bill S
bill@wamstaxltd.com