Cash gift from abroad - tax/mortgage implications

marvellouspotato

Hi all,

We are looking to buy shortly and will be receiving a large deposit from my mother-in-law towards the purchase.

What would be the tax implications of receiving the cash, and would it make a difference if it was declared as inheritance, a gift or a favourable loan?

What would be the most advisable way to declare the source of the deposit to a mortgage provider?

All advice welcome!

alchemist.1

The truth i.e. a gift to your wife/husband. The mortgae providers will ask for a signed form confirming that it is a gift.

Inheritence tax will apply if the mother in law doesnt make it seven years but no income tax for you/your wife to pay.

A loan will mean that the mother in law will have a legal interest in the property and therefore the main mortgage providers wont let you use it as a deposit (as far as i am aware).

Edit. Money laundering checks will go into overdrive if the money is coming from abroad.

PBA

A loan doesn't necessarily mean the lender will have an interest in the the property. It will need to be included in the affordability calculation, and not all lenders accept loans as the source of deposit. But agree 100% with the previous poster, trying to second guess what the advisor wants to hear can only lead to trouble. Tell them the truth and they will work out the best way to present your case to the underwriter.

getmore4less

alchemist.1 wrote: »

Inheritence tax will apply if the mother in law doesnt make it seven years but no income tax for you/your wife to pay..

Even if UK IHT applied it would not be an issue for the recipient of the gift as it is only in VERY VERY rare circumstances that a gift has to pay any IHT.

The MIL estate may have to pay more due to a reduced nilrate band.

kingstreet

Expect to have to provide the usual gifted deposit letter/form depending on lender/solicitor, plus ID & Proof of Address for donor and bank statements showing gift leaving donor's account and arriving in recipients.

xylophone

Presumably your MIL has checked any implications of making such a gift from the point of view of any Australian laws etc.

http://www.bubhub.com.au/community/forums/showthread.php?511678-How-much-cash-can-you-gift-without-tax-implications

I assume that "Centrelink" is the Aussie equivalent of DWP?

Otherwise, it would be advisable to ask your MIL to provide a letter stating that she is making you an absolute gift, detailing the amount and source of the funds?

You might be well advised to inform your bankers that the money is expected and comply with any requirements they may have.

If you need to hang on to the cash for a few months, then NS&I Income Bonds might suit.
http://www.nsandi.com/income-bonds