Transfer of UK properties to avoid inheritance tax - USERNAME: khp4444
Tax Question:
I am UK born to UK parents. I moved to Spain in 1980 and have been UK non-resident since.
I have always paid UK tax on my UK property income.
I have a son with French and Spanish nationality domiciled and resident in France. How can I transfer my properties to my son in the most financially efficient manner with a view to avoiding UK inheritance tax.
My partner who has French and Spanish nationality and Spanish domicile and residence also has an offshore LLC with jurisdiction in Delaware USA which owns one UK property. We are not married.
Hope you can help me Keith P
Answer:
The simplest option is to simply gift the properties to your Son. For UK inheritance tax purposes this would be a potentially exempt transfer ('PET') and the value transferred would be excluded from your estate providing you survive for 7 years.
The downside to this would be the capital gains implications. As you're non resident and non ordinarily resident there would be no UK capital gains tax.
However, if the property has increased in value since purchase and you are Spanish resident you would need to assess the Spanish tax implications of the transfer.
UK stamp duty would not be an issue providing your Son did not take over any mortgage on the property.
The above assumes you are UK domiciled. If you are non UK domiciled due to having severed all ties with the UK and making Spain your domicile of choice you could avoid UK inheritance tax on the properties by simply holding them via an offshore company. You could also combine this with an offshore trust if you wish to provide the properties for the benefit of your Son.
About the Author
The Author of this article/answer is our site Editor, Lee Hadnum. Lee is a rarity among tax advisers having both legal and chartered accountant qualifications. After qualifying a prize winner in the Institute of Chartered Accountants exams, he also went on to become a chartered tax adviser (CTA).He worked in Ernst & Youngs Entrepreneurial Services department for a number of years before setting up his own tax planning practice. He is now a full time tax author.
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