This site uses cookies. By continuing to browse the site you are agreeing to our use of cookies. To find out more about cookies on this website and how to delete cookies, see our Cookie Policy.
Analytics

Tools which collect anonymous data to enable us to see how visitors use our site and how it performs. We use this to improve our products, services and user experience.

Essential

Tools that enable essential services and functionality, including identity verification, service continuity and site security.

Where Taxpayers and Advisers Meet

Gift/Inheritance Tax Non Domiciled Person

NonDom41
Posts:54
Joined:Tue Nov 28, 2017 3:03 pm
Gift/Inheritance Tax Non Domiciled Person

Postby NonDom41 » Sun Nov 04, 2018 4:59 pm

As long as a Non-Dom is resident in the UK for less than 15 years he qualifies for some tax reliefs on his foreign assets. For example, he can give foreign assets to his children as a gift and this gift is not subject to UK-inheritance or gift tax. Or he can transfer his foreign assets to an offshore trust UK-gift & inheritance tax free. If such a measure has been taken before the 15-year residency no gift/inheritance tax is due after this period of time no matter when the donor dies afterwards.

Please note that these gift transfers of foreign assets take place inside foreign countries only completely outside of the UK and are not brought into the UK and have no UK-origin or relation.

My question is if there are any other measurements that can be taken before the 15-year residency that have the same effect as above, aside of making a gift or establishing a trust ?

AGoodman
Posts:1738
Joined:Fri May 16, 2014 3:47 pm

Re: Gift/Inheritance Tax Non Domiciled Person

Postby AGoodman » Mon Nov 05, 2018 1:17 pm

Both involve using the fact the assets are excluded property. An excluded property settlement is the only way to preserve excluded property status for the years after the settlor becomes deemed domiciled. He or she can of course still make gifts once they are deemed domiciled, it is just that they are subject to the 7 year rule for PETs.

Bear in mind that it is also possible to become UK domiciled under the general law in less than 15 years - usually where it is clear the individual will not be leaving the UK (say they move to a UK nursing home).

There are of course other things you can do unrelated to non-dom status. most examples use business property relief or (if you want to buy a farm) APR.

NonDom41
Posts:54
Joined:Tue Nov 28, 2017 3:03 pm

Re: Gift/Inheritance Tax Non Domiciled Person

Postby NonDom41 » Sun Nov 11, 2018 11:13 pm

@AGoodman Thank you for your information.

Aside from the general 7-year regulation and other possibilities for all domiciled persons, in terms of the non-dom status there are only the aforementioned options, i.e. gifting an asset or transferring to an offshore trust. For example, the donor can gift a house (located in the USA) to his son tax-free before the 15-years elapse. Is this correct?

What is necessary to prove such a gifting has occurred before HMRC? A written contract signed by a notary? A deed of gift ?

AGoodman
Posts:1738
Joined:Fri May 16, 2014 3:47 pm

Re: Gift/Inheritance Tax Non Domiciled Person

Postby AGoodman » Mon Nov 12, 2018 12:01 pm

UK inheritance tax free - yes, provided you have not become domiciled under the general law (i.e. formed an intent to remain in the UK permanently or indefinitely).

Also bear in mind that it may not be UK CGT free or US tax free.

Proof is unlikely to be required - you should just transfer the property in accordance with the local US law.

NonDom41
Posts:54
Joined:Tue Nov 28, 2017 3:03 pm

Re: Gift/Inheritance Tax Non Domiciled Person

Postby NonDom41 » Sun Nov 18, 2018 3:17 pm

Thank you very much.

How is the 15-year grace period calculated ? By tax year or calender year ?

If a NonDom arrived in the UK on January 01, 2005, when does the 15-year time period expire ?

DavidTreitel
Posts:271
Joined:Thu Aug 16, 2012 4:31 pm

Re: Gift/Inheritance Tax Non Domiciled Person

Postby DavidTreitel » Mon Nov 19, 2018 9:49 am

A gift of real property in the United States can give rise to a US gift tax liability.

AGoodman
Posts:1738
Joined:Fri May 16, 2014 3:47 pm

Re: Gift/Inheritance Tax Non Domiciled Person

Postby AGoodman » Mon Nov 19, 2018 11:40 am

Tax years. If somebody was UK tax resident from 2004/5, they will be deemed domiciled from tax year 2019/20.

NonDom41
Posts:54
Joined:Tue Nov 28, 2017 3:03 pm

Re: Gift/Inheritance Tax Non Domiciled Person

Postby NonDom41 » Tue Nov 20, 2018 4:48 pm

@DavidTreitel

You are right - HMRC would not demand UK tax for giving a property away in the USA. However, this change of ownership has to be registered with the US-land registry. The IRS would treat this as a gift and would demand full gift tax.

What one can do is give away the property piece by piece. This means that $15,000.00 (US gift tax allowance) of the property can be gifted every year. In the UK this would also not trigger an immediate tax (7-year grace period). However, this is a time-consuming process.

NonDom41
Posts:54
Joined:Tue Nov 28, 2017 3:03 pm

Re: Gift/Inheritance Tax Non Domiciled Person

Postby NonDom41 » Tue Nov 20, 2018 7:08 pm

@Goodman

Thank you for the clarification. I was not sure because the Non-Dom was not in the UK for the entire calendar year of 2004 and therefore thought the count might begin with the tax year 2005/06.

Let's say the Non-Dom leaves the UK and becomes resident in Austria (he keeps no ties to the UK and his centre of life is clearly Austria - he is an Austrian citizen from birth). However, his son (also an Austrian citizen) continues living in the UK because he works there. If the Non-Dom dies in Austria, will HMRC demand Inheritance tax from his son because he lives in the UK?

Please keep in mind that Austria has no inheritance tax.

AGoodman
Posts:1738
Joined:Fri May 16, 2014 3:47 pm

Re: Gift/Inheritance Tax Non Domiciled Person

Postby AGoodman » Wed Nov 21, 2018 11:40 am

First, there has to be an actual IHT liability - if the individual died as a non-res. non-dom. with no UK assets, there is no liability.

Bear in mind that if he did become deemed UK domiciled, it takes 3-4 years (I forget) to lose the status after leaving.

If there is a UK IHT liability, HMRC can pursue any person who has received assets from the estate.


Return to “Inheritance Tax, IHT, Trusts & Estates, Capital Taxes”

cron