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Where Taxpayers and Advisers Meet

Gift Tax between USA and UK

DavidCoo
Posts:1
Joined:Wed Aug 06, 2008 3:05 pm

Postby DavidCoo » Fri Sep 19, 2003 9:09 am

A friend in the USA wishes to gift me with £1,000,000 sterling. The gift is in no way intended to avoid inheritence tax as the friend in question is still young, fit and healthy. The money is intended purely as a gift and has no strings attached. The question I have is what would be my tax posistion on receiving this gift? Would I be taxed on recieving the money in the UK? Would my friend in the USA be taxed on giving away this money? Would there be in effect double taxation from both countries? If so are there any ways to avoid or at least decrease it?

Taxbar
Posts:1187
Joined:Wed Aug 06, 2008 2:19 pm

Postby Taxbar » Sun Sep 21, 2003 5:27 am

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


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