Could this have tax implications for my wife ?

Tyler_Du

My father in law has sold some land abroad (India) and is looking at ways of bringing some of the sale proceeds into the uk. Somebody has told him that you can transfer £500 a month to a blood relative without penalty. As such my wife has given him her account details and he plans to transfer £500 pm, this money will then be transferred back to my father in law (to one of his uk accounts) I should add that my father in law is in his 80s. I've told him he needs to speak to a specialist tax adviser / accountant but he seems to have ignored this advise.

le_loup

In the UK transfers between husband and wife have no tax implications.
In the UK gifts to anyone are not taxable.

agrinnall

There doesn't seem to be any husband and wife involved in this, it's father and daughter.

Without knowing the context of the £500 a month advice it's difficult to say what that is supposed to mean, but one guess is that it's based on the £3000 per annum that can be gifted outside of IHT, and where the previous year's allowance can be used this year if not already used, making a total of £6000 (or 12 x £500).

I imagine that at FiL's age it may well be IHT that needs to be considered. We don't know how much money is involved, but there is certainly a risk that if it goes through the daughter's account it could be counted for IHT if he dies, even if the money has been transferred back to him (in which case it could end up being hit twice by IHT, unless HMRC have some method by which this can be avoided). If the amount is more than £6000 I would say professional advice would be the way to go rather than relying on what "somebody" has said (or what amateurs such as me say on here).

thenudeone

As stated, under UK law, there is no tax on gifts of any size.

If the donor dies within 7 years then gifts made in that time get added back to the estate on a sliding percentage scale, to see whether the estate is over £325k and therefore inheritance tax is due, but that tax will be paid from the estate, not by the donor.

Certain gifts are excluded from being added back including an annual allowance of £3k, small gifts under £520 to an unlimited number of people, limited wedding gifts, and regular gifts given from the donor's income (not capital) which don't affect the donor's standard of living. The rules are here: http://www.hmrc.gov.uk/inheritancetax/how-to-value-estate/gifts.htm and http://www.hmrc.gov.uk/inheritancetax/intro/basics.htm#9
http://www.hmrc.gov.uk/inheritancetax/pass-money-property/exempt-gifts.htm

I have no idea on Indian law, and unfortunately you're unlikely to find an expert here because this is a UK forum.

CLAPTON

why doesn't FIL transfer the money directly to his own a/c?

zygurat789

Isn't there a possibilty of CGT on the land sale in India?

00ec25

CLAPTON wrote: »

why doesn't FIL transfer the money directly to his own a/c?

zygurat789 wrote: »

Isn't there a possibilty of CGT on the land sale in India?

The way I read the OP the question being asked seems to be – can FIL evade UK CGT by siphoning funds out of India into the UK by passing them off as a recurring gift to his daughter, which the daughter then “gifts” back to her father so he ends up with the cash in the UK but from a source which is not directly linked with the fact it was his money from the sale of his overseas property to start with
I think we can safely say that his proposal would have tax implications for himself for fairly obvious reasons but whether he will get caught by HMRC who can say?

agrinnall

Why would there be any UK CGT to pay on the sale of land in India? I can see that it may be a ruse to circumvent taxes levied in India, but I can't see how it's going to affect his UK tax position.

molerat

Depending on domicile and tax status capital gains from abroad could be subject to UK tax.
http://www.hmrc.gov.uk/migrantworkers/tax-non-uk.htm
http://www.hmrc.gov.uk/cgt/intro/when-to-pay.htm

agrinnall

Thanks molerat. I wonder if this section is where the £500 has come from?

However, if you bring more than £500 of your income and gains into the UK you must still complete a tax return to tell HMRC about it and pay UK tax on it.