£150K from France

Soot2006

Currently learning my way through the Quagmire of inheritance tax, gift tax, UK/France double-taxation laws ... and am confused!

Mother wants to give me £150K. Let's assume without strings attached.
(Estate worth over French & UK inheritance tax threshold)

Mother (not British) & money are resident/domiliced in France. Money was earned in France.

I have:
French bank account, and
UK bank account.

I am resident/domiliced in UK.

What are the tax implications of getting the money into my ownership in the UK?

(I am assuming French gift tax & inheritance tax laws will be applied first, negating any claim by UK inland revenue (because of double taxation laws?) - in this case what do I tell inland revenue, if anything? Do I need to warn the bank? Any way of getting it in, but having it declared PET in UK instead of paying French tax (because I am resident here?) or is that just silly thinking ... )

What about a family loan, without interest?

Any help & experiences welcome, because I am losing myself more and more each day!

fengirl_2

There is no gift tax in the Uk, so you can receive as much in the UK as your mother wants to give you with no liability. You do not therefore inform HMRC. Presumably the payment can be traced back to your mother should HMRC ever challenge you and try to say that it is earnings (which would be taxable).

Soot2006

Thanks for your reply.

I think for me a little knowledge is a dangerous thing ...

From direct.gov.uk

Exempt gifts

Some gifts are exempt from Inheritance Tax because of the type of gift or the reason for making it. These include:

Wedding gifts/civil partnership ceremony gifts

Wedding or civil partnership ceremony gifts (to either of the couple) are exempt from Inheritance Tax up to certain amounts:

• parents can each give £5,000
• grandparents and other relatives can each give £2,500
• anyone else can give £1,000

You have to make the gift on or shortly before the date of the wedding or civil partnership ceremony. If it is called off and you still make the gift, this exemption won't apply.

Small gifts

You can make small gifts, up to the value of £250, to as many people as you like in any one tax year (6 April to the following 5 April) without them being liable for Inheritance Tax.
But you can't give a larger sum: £500, for example, and claim exemption for the first £250. And you can't use this exemption with any other exemption when giving to the same person. In other words, you can't combine a 'small gifts exemption' with a 'wedding/civil partnership ceremony gift exemption' and give one of your children £5,250 when they get married or form a civil partnership.

Annual exemption

You can give away £3,000 in each tax year without paying Inheritance Tax. You can carry forward all or any part of the £3,000 exemption you don't use to the next year but no further. This means you could give away up to £6,000 in any one year if you hadn't used any of your exemption from the year before.
You can't use your 'annual exemption' and your 'small gifts exemption' together to give someone £3,250. But you can use your ' annual exemption' with any other exemption, such as the ' wedding/civil partnership ceremony gift exemption'. So, if one of your children marries or forms a civil partnership you can give them £5,000 under the wedding/civil partnership gift exemption and £3,000 under the annual exemption - a total of £8,000.

This seems to indicate that tax would normally be due on a large gift sum?

But this

so you can receive as much in the UK as your mother wants to give you with no liability.

sounds much better .

fengirl_2

The article you quote relates to the potential Inheritance Tax liability of the donor. As your mother resides in France, this will not apply to her. there is never any liability on the recipient in the UK.

Soot2006

fengirl wrote: »

The article you quote relates to the potential Inheritance Tax liability of the donor. As your mother resides in France, this will not apply to her. there is never any liability on the recipient in the UK.

Ahaaa, and that explains where I've been going wrong in my thinking.

Thanks for your help, again.

Cook_County

You should be aware that French gift tax probably applies and so you should consult a French advocat for advice:

http://www.sykesanderson.com/service_france/articles/french_gift_tax.asp

Separately the estate of your mother will be subject to French forced heirship law. You will need a lawyer familiar with both UK & French tax & law on death (as against just assuming that the estate will exceed limits) because there may well be planning that could be done now such as creating an excluded property trust with this lump of money.

Soot2006

Yeah am definitely thinking a lawyer will be required ...

I know in France parents can give each child 150K Euros per 6 years without paying gift tax, but there are additional residency complications and it all seems more & more complex every time I look at it!