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Where Taxpayers and Advisers Meet

Not Domiciled

NonDom41
Posts: 47
Joined: Tue Nov 28, 2017 3:03 pm

Not Domiciled

Postby NonDom41 » Tue Nov 28, 2017 3:47 pm

A) I moved to the UK in 2005 and I am considered a non-domiciled person. My sone came with in 2005. He was 9 years old at this date.

Is my son automatically also not-domiciled because of my non-domiciled status ?

B) If I buy a foreign property outside of the UK for him in his name (and paid by a source outside of the UK), is there any tax obligation in the UK ? Since we moved to the UK in 2005 we are below the 15 year threshold in terms of inheritance tax.

Can anyone answer these questions ?

AnthonyR
Posts: 309
Joined: Wed Feb 08, 2017 2:33 pm

Re: Not Domiciled

Postby AnthonyR » Tue Nov 28, 2017 9:56 pm

A) A child usually inherits the domicile of their father at birth (except where the parents are unmarried when they take the domicile of the mother) this is the domicile of origin.

Until they reach the age of 16, their domicile follows the person they are legally dependent on (father or mother), so if that person changes domicile then the child's will change as well.

They then have the ability later in life to acquire a domicile of choice.

B) It depends what happens to the asset. If it simply sits there until you or the child wants to use it then there's no UK tax issues. However, if it is let out and generates income which is brought into the UK then this income will be deemed to be your income and taxed on you.

The non-domiciled rules and parental settlement rules are quite complex, so I'd suggest you take some advice on the subject.
Anthony Rogers LLB CTA TEP
Fusion Partners LLP
anthony@fusionpartners.co.uk

NonDom41
Posts: 47
Joined: Tue Nov 28, 2017 3:03 pm

Re: Not Domiciled

Postby NonDom41 » Wed Nov 29, 2017 10:45 am

Thank you for your information. I know that my son has to file an income tax return in the USA as well as in the UK if the property is rented out.

I want to know if there is a gift tax (or any other tax) due in the UK when the property has been purchased (for the purchase price that will be transferred from a foreign country to another foreign country without involving the UK) under the above described Non-Dom situation.

AnthonyR
Posts: 309
Joined: Wed Feb 08, 2017 2:33 pm

Re: Not Domiciled

Postby AnthonyR » Wed Nov 29, 2017 12:34 pm

There is no "gift tax" in the UK as long as the gift is to an individual. The thing to bear in mind is that this has to be a gift with no strings. The property is no longer yours, you cannot benefit from the income, in the future if it's sold the proceeds are not yours and if at 18 your son decides he wants to sell up and take the money he can do.

If you have 'strings' attached to the property (ie you will get the income/capital) then it is a gift with reservation of benefit and remains your asset for inheritance tax purposes.

What is the purpose of buying it in your son's name?
Anthony Rogers LLB CTA TEP
Fusion Partners LLP
anthony@fusionpartners.co.uk

maths
Posts: 7901
Joined: Wed Aug 06, 2008 3:25 pm

Re: Not Domiciled

Postby maths » Wed Nov 29, 2017 1:17 pm

Anthony you appear to have overlooked the fact that the property is excluded for IHT.

AnthonyR
Posts: 309
Joined: Wed Feb 08, 2017 2:33 pm

Re: Not Domiciled

Postby AnthonyR » Wed Nov 29, 2017 1:45 pm

I have - apologies getting carried away.

You can ignore the part about strings attached as it's not relevant.

I've also overlooked the fact that your son is now 21 (not 9 as I initially read), so I assume you are buying him a home?
Anthony Rogers LLB CTA TEP
Fusion Partners LLP
anthony@fusionpartners.co.uk

NonDom41
Posts: 47
Joined: Tue Nov 28, 2017 3:03 pm

Re: Not Domiciled

Postby NonDom41 » Wed Nov 29, 2017 4:16 pm

Thank you both for your reply.

Anthony, you are right - I am buying him a house (in the USA). He is indeed 21 years old. As I realise, my son is also non-domiciled because I have been non-domiciled since 2005 and he was 9 years old at this date. We came to the UK at the same time. Correct ?

I want to be sure that buying him a house now is not subject to a gift- or inheritance tax for the time being. The property is outside the UK and the buying price is also being transferred from a country outside the UK. As I was told this will change after a 15-year non-dom-residency in the UK. We have been in the UK for 12 years so far.

I conclude that no UK-taxes will be due in terms of buying the house under the above circumstances. The only obligation will be to prepare an income tax return in the UK and the USA for rental income if the house is rented out.

Am I right ?

NonDom41
Posts: 47
Joined: Tue Nov 28, 2017 3:03 pm

Re: Not Domiciled

Postby NonDom41 » Mon Dec 04, 2017 9:47 pm

Is there anybody who can answer these questions ?

maths
Posts: 7901
Joined: Wed Aug 06, 2008 3:25 pm

Re: Not Domiciled

Postby maths » Tue Dec 05, 2017 6:03 pm

On the basis that a non-domiciled parent purchases a non-UK situs property for his adult son where the monies used to purchase the property arise and are kept outside the UK then no UK tax consequences arise.

The gift is of excluded property and falls outside any IHT charge.

NonDom41
Posts: 47
Joined: Tue Nov 28, 2017 3:03 pm

Re: Not Domiciled

Postby NonDom41 » Wed Dec 06, 2017 10:09 am

maths

Thank you very much for your information.


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