Dad's offshore - can he pay my mortgage off?

[macallan]

My father's been offshore status for years.

After a lean period, he's now feeling quite flush and looking to give me, my sister and his ex wife (all UK based) about £200-250k each over the coming year.

This will be effectively from his tax-free offshore income over the period rather than savings, so could be received monthly or held back and given as a lump sum end of year.

Clearly we would rather that is seen as a gift or loan rather than income. How best to do it? ie Is it ok as a monthly loan later written off as a gift? Or could he pay off my mortgage, or buy my sister her first house. Could the ex-wife's share be treated as an extension of the divorce settlement? Chances are he will live more than 7 years for the IHT.

[Incredulum]

A gratuitous gift is exactly that. It is not income in the hands of the receipient. Go ahead and receive the money.

[Taxbar]

Dear Macallan,

The first issue is where your Dad is tax resident and what the local laws are regarding gifts etc?

Assuming that he is clearly not UK resident and there are no adverse tax consequences in his Country of residence; then we have to consider UK tax.

Although, he maybe non-UK resident, Dad may still be UK Domiciled and therefore subject to UK IHT on any gifts.
That means the gifts will usually be PETS for UK IHT. (No UK IHT if Dad survives 7 years from date of gift.)

Next, we have to be clear that even if Dad is NOT UK Domiciled, the gifts are not made in law in the UK; as this could create a UK IHT liability.( If Dad's tax residence is not clear, there could be income tax issues as well.)

If you are talking about £6-750k, its worth getting proper advice to make sure that the money can be received without any UK or foreign tax consequences.


Daniel Feingold
Senior Partner
STTP&CO
info@stratax.co.uk