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Where Taxpayers and Advisers Meet

Non domicile parent cash gift to daughter

Marco111
Posts: 5
Joined: Tue Nov 05, 2019 4:07 pm

Non domicile parent cash gift to daughter

Postby Marco111 » Tue Nov 05, 2019 4:30 pm

I am confused about gifting rules related to foreign funds abroad. HMRC changes these laws all the time, so I am not sure if what applied in the past is still relevant. Could someone please clarify what the current tax situation is when a non-domicile UK resident individual transfers cash from a mixed fund account located abroad as a gift to his UK resident adult daughter. The transfer would be to her account abroad, and then the daughter brings the funds into the UK. The donor does not in any way benefit from the gift.

Four questions:
1) Are there any tax implications for the donor or the receipient related to this gift.
2) Do the funds have to be transferred to the recipient to an account abroad, or can they be transfered directly into her UK account.
3) If the funds are donated abroad from a non-dom donor, do they still count as a PET
4) If the donor dies within 7 years, and in that time has become deemed domicile, will this gift be considered part of his estate?

AnthonyR
Posts: 303
Joined: Wed Feb 08, 2017 2:33 pm

Re: Non domicile parent cash gift to daughter

Postby AnthonyR » Fri Nov 08, 2019 11:22 am

I'll start by saying that if you can't advise on the subject then the client probably shouldn't be relying on advice on a forum, are (were) they on the remittance basis and are the funds unremmitted mixed funds? Have they been advised on the consequences of this? As you'll appreciate the rules are complex so get them to pay for some formal advice. That being said:

1. As the donor and daughter are connected it's likely that this will be treated as an indirect remittance if brought into the UK (these rules haven't changed in 11 years).
2. See 1.
3. If it's excluded property then no.
4. If it was excluded property then it's ignored even if they become deemed dom.
Anthony Rogers LLB CTA TEP
Fusion Partners LLP
anthony@fusionpartners.co.uk

AGoodman
Posts: 888
Joined: Fri May 16, 2014 3:47 pm

Re: Non domicile parent cash gift to daughter

Postby AGoodman » Fri Nov 08, 2019 2:30 pm

slight tweaks:

1. adult children are not "relevant persons" for the remittance basis so this would not be a remittance unless parent benefitted in some way.
2. If the foreign account contains untaxed income/gains then no. If only IHT is a concern, it may be okay but transfer to foreign account is safer.

Marco111
Posts: 5
Joined: Tue Nov 05, 2019 4:07 pm

Re: Non domicile parent cash gift to daughter

Postby Marco111 » Fri Nov 08, 2019 5:28 pm

Thank you very much everyone for your replies. I appreciate the complexity of this, and that is why I am asking the opinions of the people of this forum, to benefit from their understanding of the rules.

The background is as follows:
This was a portfolio of funds/shares which the father had before moving to the UK. Initially he used remittance basis taxation, but then later switched to arising basis, so these funds come from a mixed bag containing capital as well as taxed and untaxed income & gains. Rather than go through the headache of trying to separate capital and taxed and untaxed income & gains we thought it might be easier to gift the whole lot to his daughter so that she can put it towards buying a UK property. He is not going to benefit from this at all.

I just don't want to have missed some HMRC ruling or other that ends up complicating his life down the road.

Marco111
Posts: 5
Joined: Tue Nov 05, 2019 4:07 pm

Re: Non domicile parent cash gift to daughter

Postby Marco111 » Thu Nov 28, 2019 6:07 pm

I have another question related to this topic. It is proving quite difficult for the daughter to open an account abroad to receive the funds the father wants to gift to her. The banks seem to require very large deposits or proof of working abroad before they are willing to open the account.

We were wondering if it would be okay to use the grandmother's account for this purpose. The granny lives abroad, is non-resident and non-domicile in the UK, and has funds available abroad to lend to the daughter. Could granny (the dad's mother) loan the money to the daughter (transfer the funds from abroad to the daughters UK account). The dad could then pay granny back into her account located abroad using the funds which he would have gifted the daughter.

This could avoid having to set up an account abroad for the daughter. So basically, the dad is paying off the daughter's loan as a gift, and the daughter gets the money without having to create an account abroad.

Does this have any tax implications either from an IHT point of view? Would this risk counting as a remittance by the dad (he will not benefit from the funds in any way).

I know this sounds convoluted, but so is opening an account abroad for a single gift transaction.

AGoodman
Posts: 888
Joined: Fri May 16, 2014 3:47 pm

Re: Non domicile parent cash gift to daughter

Postby AGoodman » Thu Nov 28, 2019 6:50 pm

May well work but you will need to work through s.809L ITA bearing in mind neither mother nor daughter are relevant persons.

Look particularly at the references to "relevant debts".

Marco111
Posts: 5
Joined: Tue Nov 05, 2019 4:07 pm

Re: Non domicile parent cash gift to daughter

Postby Marco111 » Fri Nov 29, 2019 3:28 pm

Thanks for the reply. I have had a look at the guide you mentioned and since both the daughter and grandmother are not relevant persons , and since the donor is not benefiting from the gift/loan in any way I think it looks like it should not count as a remittance by the donor.

The point that I am less sure of is the loan aspect from the point of view of IHT. Apparently a simple loan to a UK resident has for IHT purposes a UK situs. Now since the granny is non-dom and non-resident that should be okay. But I am wondering if the dad pays of the loan, if that brings it under the UK IHT umbrella, and it is included in his UK estate.


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