Dear David Coo,
Your question crosses 2 tax jurisdictions and as such theere is no clear answer because one needs to know your friends tax position in the US.
For US tax such a gift would be a chargeable gift for Estate tax purposes.
There are exemptions and he might want to consider using a number of different types of US or foreign trusts to effect the gift tax efficiently for US tax.
As long as the gift was a genuine arm's length transaction and not in return for any work or other commecial relationship then no UK taxes would be payable providing the gift was in cash.
If it was in any other form then it there might be capital gains on any increase in value from the date of gift to encashment or relaisation.
Thre could be tax savings on an ongoing basis if the gift was made into a trsut for your benefit.
These would be lower income and gains tax at 34% as opposed to 40%.
I would recommend that a UK tax adviser and a US one consider which trust structure would produce the best tax results for both parties and both tax regimes. There a few potential benefits for inheritance tax in relation to US trusts settled for UK beneficiaries and that needs to be considered as well.
If you want me to assist with the Uk end and recommend a US tax lawyer as well let me know.
Daniel Feingold
Strategic Tax Planning
International & UK Tax Consultants
Tel : 0161 720 7244
E-mail:
sedrate@easynet.co.uk