|
|
 |
|
home |
Inheritance Tax Q&A
|
Inheritance Tax Q&A's
New - FREE Tax Q&A Service!
If you're a site member and would like to submit a question, simply e-mail us via this link.
We'll publish our FREE response to your tax question(s) on the website within 2 working days. |
|
Use of deferred shares to reduce CGT/IHT
Question: property investment co valued at £2m, client(mother)owns 30shares , two daughters own 25shares each. Client wishes to transfer say 20 shares to daughters. It has been suggested that the issue of deferred shares to the daughters with rights only to transfer into ordinary shares at a future date can achieve the transfer of value without IHT/CGT consequences. IS this possible and how in practice does it work. . . .
keep reading
|
Normal expenditure out of income and debt waiver?
Question: If Dad waives son's loan instalments (with a deed): As I understand it (after much reading this evening), a transfer of value is from income if it can be shown not to be from capital (the other "gifts from income" requirements being met). That sounds good and my question is this: how can waiver of loan instalments not be depleting the estate capital value, by virtue of the debt not being repaid? I can find only one example where loan written off is treated as income, though I think it is a rather useful example, could it be used as argument? Here: http://www.hmrc.gov.uk/manuals/cfmmanual/CFM5207a.htm the key sentence being: Girtwest, the debtor, must bring in the £50,000 released as a profit into its accounts. This is required by FA96/S85 (3)(e) (NOT IHT but still a concept). My underlying concern here is that an IHT adviser has Dad using up mum and dad's £3,000 x 3 gift exemptions and I come along and say, "hang on, what about "gift out of income"?" I fear a tart response that a loan waiver depletes the estate and what do I know anyway? However Girtwest above does at least support the concept of waived loan being income. And then: "gift out of income" if defined as "not requiring use of capital" works - except that I cannot avoid the feeling it DOES deplete the estate's capital value. And so I go round in a circle. Rescue please? . . .
keep reading
|
Minor child's inheritance of Australian estate
Question: I am trying to come to grips with sorting out my late husband's estate. He died in August 2009, he was Australian. Our two properties, one in UK and one in Australia were owned jointly and the titles are such that they will directly pass to me. I will also inherit a percentage of his Australian estate consisting partially of Australian shares. The children 18 and 12 will inherit from their father's Australian estate also. I have been told that my son is legally too young to inherit and a trust will have to be set up for him according to Australian inheritence laws and that as he is a minor the trust is liable to be taxed at a high rate (this will be compounded by him being a UK resident I imagine). I don't suppose that there is any way to avoid him losing so much of his inheritence to the Australian Tax Office is there? . . .
keep reading
|
Discretionary trust v flexible gift trust
Question: A widow in his 60's has assets of around £300k, including a 2nd home, rented out(£6k per annum) worth about £120k and acquired 10 years ago for £30k.He wants to ring fence this property by putting it in trust for his son. What are the respective advantages /disadvantages of using a non-settlor interested discretionary trust as against a flexible gift trust, in relation to 1.capital gains tax on the transfer to the trust 2income tax on the rent 3.iht (he is not too concerned about this as he does not expect his estate to exceed the nrb threshhold thank you . . .
keep reading
|
Loan that was never paid back and became a gift
Question: Hi A friend of mine (UK resident and domicile) received a personal loan a few years ago (quite a large amount) from a very close relative abroad (non-UK resident and non-UK domicile). This relative is now on his death bed, and he said he doesn't want the loan to be paid back. As far as my friend is concerned, what does he have to do? Are there any UK tax implications? can a loan become a gift? I don't think there is any piece of paper to say that the original transfer was a loan, it was done on trust. So I guess no one can legally ask for the money back. Thanks for your help . . .
keep reading
|
IHT gifted house
Question: A mother X gifts her daughter Y her house. The daughter moves in with her even though the Y has another house (her main residence). X becomes disabled. X pays all the utility bills. Y pays the other expenses. Y owns the house outright. They live together for more than 15 years. X dies. Does the whole house or half the house belong to Y estate? . . .
keep reading
|
UK CGT and IHT on transfer of property to Son
Question: I am living as a US citizen in the US, but also have UK citizenship and own a property in the UK. The property has a number of buildings and is run as a rental property business, on which I pay UK tax, although if I sell it, as I have been a non resident for over five years, CGT would not be payable in the UK, but in the US. The overall property is valued at between 1.2 and 1.4 million pounds, but I have been advised that if the various properties are sold separately it would likely raise more. My questions relate to IHT and CGT. I am considering making a Potentially Exempt Transfer of one or two of the cottages to my son, who currently lives in one of the buildings at the overall property. He would like to purchase a different property elsewhere for he and his family to live, and so the sale of the two cottages would allow this to happen. For ease of responding to the questions, let's say that the two cottages are valued at 500,000 (together), and the remainder of the property is valued at 1 million pounds. Questions: If I make this Potentially Exempt Transfer of one or two cottages to my son: a) Is there stamp duty payable on the transfer? b) If I sell the remainder of the property at any time during the 7 year life of the PET before it fully leaves my estate, will I only be paying CGT on the remainder, i.e. on the 1 million pounds (less the allowable deductions). c) If I make a PET of one or both cottages, I am assuming that the deeds of these properties will then be in my son's name and that he can then sell them, any time after the transfer, in order to purchase this other property. Is that correct? d) I had the thought that if a property was purchased for approx 300,00 pounds then that could be purchased by my son (assuming that c) above is correct) and would of course then rely on me surviving seven years to be fully his. However, if a property was purchased (rounding out figures) for 500,000 pounds, then I am thinking that we could form a limited liability company or partnership to purchase it, and my son would have 300,000 shares and I would have 200,000. My thinking on doing this was to make it easier for me to make further gifts (PET's) of shares in the property, or for him to purchase them from me, over time, until it was fully in his ownership. Does that sound like a useful and practical direction to be thinking in? (rather than the new property being in our joint names) or are there pitfalls and considerations that I am not currently aware of? . . .
keep reading
|
Separation and the family home
Question: I would be grateful for your help regarding separation, and the family home. Where a husband and wife own their main UK residence as tenants in common, what legally enforceable and tax efficient agreement would provide for 100% of the home to be used for the spouse who remains there (with the children) without the whole property actually being transferred to this remaining spouse. The party that is leaving the marital home also does not want the home to be considered part of his or her assets. Longer term there is the expectation that the property would be inherited by the children, with the party leaving the marital home buying another property. Finally would your answer differ if any of the parties were non-uk domiciled, I understand transfers between spouses are treated differently for inheritance tax if one is non-domiciled and the other is not? . . .
keep reading
|
IHT/CGT on legacy
Question: I want to gift a buy-to-let property to my son. Must I inform the taxman and must I pay CGT on the gift? The property was bought in 2001 for £310k and is now valued at about £400k. . . .
keep reading
|
Putting assets into an offshore company
Question: I am UK-domiciled, but non-resident. I wish to put some assets (shares in a European company) into an offshore company. I am proposing setting up a wholly-owned offshore company and then using the assets as consideration for subscribing for new shares in that company. Is this possible? Would this be counted as a transfer of assets and be subject to immediate UK IHT? Is there a way to avoid immediate IHT? [I can't see why this would be liable for IHT, because the company is _my_ asset and is part of my estate on my death, and so its value would be subject to IHT on my death.] . . .
keep reading
|
IHT and CGT question
Question: My mother and father bought a property in 1972 for £12,500 and converted it into 2 upper floors of offices a ground floor shop and basement offices, each of the 3 'units' have been rented out since to a variety of small businesses. This provided them with a nice pension (full occupancy £21000pa). In Sept 2006 following a house move my mother gifted £85000 each to my sister and myself, then 18 months ago my father died (leaving everything to my mother). Now at 80yrs my mother has suggested that something needs to be done regarding the rental property, the upper floor offices are currently empty and the overall management is too much for her. Her plan was to leave the property and her house to her two children (my sister and myself) and split any savings between her 6 grandchildren. Looking at her estate she has approx £1m of which the rental property is approx £400k, her own home £300k and the remainder in various savings. She has suggested giving my sister and myself the rental property now (she does not need the rental income from the property). Removing £400k from her estate would potentially save IHT (if she survives 3-7 yrs). She is in good health. Possible options that I have thought of.. Direct gift of the property to my sister and myself, but what would the position be regarding CGT and would stamp duty be due? Deed of variation on my fathers will, using some of his nil rate to leave his part of the rental property to my sister and myself. My mother takes out a mortgage on the property, thus reducing the value of the property, gifts the cash (no CGT) and gifts the property separately, the mortgage is then paid off...? (My sisters and my own financial situation are different with different needs and priorities, we may decide to keep the property , sell the property or I may consider buying my sisters share off her.) Any other options? How to evaluate the options, Pros and cons pitfalls etc.. (basically HELP!!) . . .
keep reading
|
Transfer of UK house to non dom spouse
Question: Hi, I want to transfer a UK house held solely in my name (worth ~£500k) to my wife who is a non dom (born in Australia), although she is resident in the Uk, has a UK passport, pays UK income tax and has lived here since 1996. She has not elected to be a UK domicile, and she has no overseas income. Would there be any CGT/IHT implications of this transfer? Thanks for any help . . .
keep reading
|
UK property for non resident and UK CGT/IHT
Question: Hello, I have just joined the Wealth Protection Report website yesterday, and I have a question: I have become a naturalized US Citizen and have lived in the country for 7 years, so have now fulfilled the five years domiciled outside the UK. I have owned a property in Devon UK since 1986, and I am now negotiating selling the property to my son, who lives there with his partner and 2 children. The property is actually composed of a residential farmhouse and a number of residential unfurnished letting properties that has been my business. The property is valued probably in the region of 1.2 to 1.3 million pounds, (although the Valuer who came to value it said it could vary as much as 25% as it is quite a complex property to value. However I am proposing to sell the property to my son for 1 million pounds (out of which will come 300 pounds to my ex husband, and I am leaving a further 400,000 invested in the property, to be paid out if it is sold). I have already clarified with Inland Revenue that there will be no Capital Gains payment due to the UK, but I know that I will be paying it in the US, and am working with an accountant here in the US on that side, and I understand that I will likely be paying CGT on the sale price and not the market value. My question as it relates to UK Tax Laws, specifically IHT, is this: If the sale price to my son is 1 million pounds, and the market value is variable, is there a deemed potentially exempt transfer of a certain amount beyond the 1 million pounds, and how is that worked out. If the answer to that is yes, then what is your advice on setting the market value higher or lower, as it relates to the interchangeability of CGT and IHT. I'm presuming that if it is set low, then on selling it, he could be liable to more CGT, but if setting the market value higher then he could be getting more on a potentially exempt transfer. A further aspect of the question is: what happens if he sells the property before the seven years of the PET is up - how does all that work in relation to CGT. If you see any other way of dealing with this situation I would welcome your advice. . . .
keep reading
|
Inheritance tax implications from joint mortgage
Question: My 70 year old mothers' savings ran out a year ago. Instead of downsizing her mortgage-free property, she has taken out a joint offset mortgage with myself, allowing her to borrow up to £250,000. She will probably inherit some money sometime in the future from her mother allowing her to pay back the loan and can then reevaluate her long term plans. Because of her age, she was unable to get a mortgage in her own name. The house is soley her own and the mortgage, although in joint names, is for her benefit only and she is to repay it. Is there something we can do to ensure that, should my mother die with the mortgage not redeemed, the full mortgage is deducted from the value of her estate before IHT is paid? (ie not just her 50% share). . . .
keep reading
|
Leaving the UK to avoid inheritance tax
Question: My wife and I are retired and considering emigrating to avoid inheritance tax.We have State pensions and I have a private pension. We have a portfolio of mixed investments and a house. We are considering Australia (4 yr extendable)Cyprus,IOM or Ireland.Which would you recommend and why? Once we leave ,must we remain outside the UK for the first three years or can we return for up to 90 days/yr immediately? Thanks . . .
keep reading
|
Property/valuables inherited from the US
Question: I am a UK resident and my Aunt who has lived in the US and was a citizen there has died leaving the estate and jewellery to me. The property is valued at approx $100000 to $150000 and the jewellery at Approx $80000. I am wondering where I stand with regard to paying tax. I believe it will not be applied in the US but wanted to know if I would have to pay any tax in the UK. . . .
keep reading
|
|
|
|
|
|
|
 |
|
 |
|
|
 |
Here's what our members are saying ...
"I joined the site after reading an offshore tax guide and was certainly not disappointed. The practical and 'to the point' tax planning has already saved me a considerable sum. I'd recommend this website to anyone."
Jerry Brown, Edinburgh
"I've saved £5,659 in CGT by using this site to double check my accountants advice. My wife has also identified further income tax savings of over £2,000 as result of the property tax articles.
In our case it's well worth the £10 membership fee."
Derek Bailey, Birmingham
I must thank you for the most informative reply to my enquiry.
It is so extensive, I intend setting an evening aside to absorb it all.
Again, thank you for a most useful website.
Lorne B, Sutherland,UK
"Well written reports that are clear and insightful. I look forward to reading them every week!
Natasha Foude, France
"I have to say your web site is by far the best prepared and most informative that I have seen."
Elsa Budding, Newcastle
"I'm planning my emigration and the offshore reports are exactly what I'm looking for. I'll definitely be renewing!"
Sarah Mather, Reigate, Surrey.
"The property tax advice service was excellent, and I'd have no problems recommending it to anyone. I received my answer within 1 day and was very pleased with the response
Robert Saunders, Leicester
|
|
|
|
Offshore Tax Book
Non Dom Tax Book
Tax Havens Book
|
|
|
Capital Gains Tax
