Tax due when receiving a house as a gift from Germany?

judywoody

Hi I hope someone can help.

I am married and a resident in the UK - but a German citizen. My father, who lives in Germany, would like to buy us a house (we are first-time buyers). He is in good health.

There are a few questions I need to clarify with regards to taxes. The houseprice will not exceed £ 325,000. But I am not entirely sure if I need to pay tax if he gifts us the money or buys us a house - I know about the 7 year rule but then I know that gifts over £ 3000 a year are taxed. And I am unsure whether this is to be viewed as a gift or part of my inheritance?

Also, will it be better for him to transfer the money or to buy the house and then change it into my name?

I also would like to avoid double-taxation. I am not planning to move back to Germany and I am a domicile in the UK.


Someone told me the following:

As the recipient of a gift in whatever form, cash or property, you will not have to pay any tax on it. Gifts by UK domiciled individuals only become subject to Inheritance Tax if they die within seven years of making the gift. Assuming your father is not UK domiciled and has no UK assets, he is beyond the reach of the UK tax authorities as far as Inheritance Tax is concerned.


But this is still a highly valuable gift..I can't imagine that the HMRC doesn't want to see a penny...also, once my father dies there will be a lot more money to inherit and I am not sure how to avoid double taxation...

xylophone

If your father is resident and domiciled in Germany for tax purposes then he is subject to any German regulations concerning gift/inheritance tax. http://ld.practicallaw.com/3-500-8674?source=relatedcontent#a370165 might be of interest.
There is no cash gift tax in the UK but cash gifts made by UK resident and domiciled individuals may be subject to IHT. http://www.hmrc.gov.uk/inheritancetax/pass-money-property/exempt-gifts.htm

Gifts of assets made by UK resident and domiciled individuals may be subject to CGT on the donor. http://www.hmrc.gov.uk/cgt/intro/basics.htm#3

CLAPTON

It is indeed true that there is no gift tax in the UK;
your father can give you anything he likes; a house or money and of any amount as far as the UK tax authorities are concerned.
I have no idea what the rules are in Germany.


If he were resident in the UK and he dies with 7 years of the gift then the value of gift is added to the rest of his estate and may be liable to inheritance tax depending upon the value of the total.

However as he isn't a UK resident then there is no IHT liability in the UK.

No tax to pay.
Again I have no idea about Germany's rules.

judywoody

Ok I just checked and he can gift me money or real estate tax free every 10 years of up to 300.000 Euros. But how about any money transfer? I thought any money being sent abroad over 10.000 Euros has to be declared - whether he transfers that to myself or the person selling the house...

xylophone

judywoody wrote: »

Ok I just checked and he can gift me money or real estate tax free every 10 years of up to 300.000 Euros. But how about any money transfer? I thought any money being sent abroad over 10.000 Euros has to be declared - whether he transfers that to myself or the person selling the house...

Declared to whom?
I should think it would be simpler all round if your father were to remit you the cash gift rather than buying a house and going through the rigmarole of transferring it to you.
It is true that because of money laundering regulations, your bank might raise a query about the transfer.
If I were expecting a large cash transfer from abroad, I would be inclined to advise the receiving bank of this fact in advance and have documentary evidence of the nature of the transaction - a letter from your father with details of his name, address, bank and telephone number should suffice?

CLAPTON

receiving 300,000 euros into your bank may raise concerns about money laundering;

I don't really know how that works but as long as you have a proper paper trail there should be no real problem but may cause some delay (and your a/c may be frozen for a while)

agrinnall

I doubt if there are any rules that say cross border money transfers within the EU have to be declared anywhere, but there's a strong possibility that the transfer will be delayed while money laundering checks take place in the UK. It might be easier to find a house first then for the money to be sent direct to your solicitor a few days before the completion date - although of course you'll be at the mercy of exchange rates.

judywoody

Declared to customs...

But I think this only applies to cash?
Just checked and found that I should use an exchange broker to avoid high exhange rates..

CLAPTON

agrinnall wrote: »

I doubt if there are any rules that say cross border money transfers within the EU have to be declared anywhere, but there's a strong possibility that the transfer will be delayed while money laundering checks take place in the UK. It might be easier to find a house first then for the money to be sent direct to your solicitor a few days before the completion date - although of course you'll be at the mercy of exchange rates.

I know little about money laundering rules but I'm curious why sending the money to a solicitor would make any diference.

presumbaly the rules are about ensuring the source of the funds are legit;
why would sending the money to a solicitor in the UK ensure the source was legit;
I would doubt that a UK based solicitor would have any special skills to determine the source from abroad.

Cook_County

Given the tenacity of domicile of origin, it seems highly unlikely that the OP is domiciled in any of the countries of the United Kingdom, but is simply choosing to pay tax on the arising basis each year.

The main issue here is one of inheritance tax, a large UK situs asset is being acquired and the current IHT limit may be as low as £55,000 on the first death. Simple term assurance may be prudent.

agrinnall

CLAPTON wrote: »

I know little about money laundering rules but I'm curious why sending the money to a solicitor would make any diference.

presumbaly the rules are about ensuring the source of the funds are legit;
why would sending the money to a solicitor in the UK ensure the source was legit;
I would doubt that a UK based solicitor would have any special skills to determine the source from abroad.

My reasoning was that it's very common for solicitors to receive large sums of money into their accounts and I've never heard of a house sale being delayed because the transfer got held up by money laundering checks. I have no evidence to support this view, but you'd think if it happened we'd be seeing threads on here complaining about it.