Being gifted ~£100000 from overseas: any caveats?

dgerrard

My parents recently sold their house in Canada, and have unexpectedly told me that they will be gifting me roughly £100000 from the proceeds.

They said they want to do it this week and their financial advisor told them there would be no penalties, taxes etc if they just transfer it into my account, so they say they're just going to go ahead. 

I feel nervous about this though: is it true that they can gift me such a large amount with no tax consequences on either them or me?  I'm in full time employment currently. 

Obviously I'm intensely grateful and spoiled, just didn't see this coming at all and want to make sure I'm properly prepared.

Keep_pedalling

There are no IHT implications. If your parents live in the UK the gift will remain in their estates for 7 years but it cannot increase the amount of IHT payable by the estate and if they are Canadian citizens then there is not IHT. 

There are no tax issues for yourself as we have no gift tax in the UK. I would however inform your bank in advance that this payment is coming it just to avoid the risk it flagged as potential fraudulent activity.

xylophone

https://logankatz.com/article/season-of-giving-tax-accounting/

https://www.fidelity.ca/en/insights/articles/canadian-inheritance-tax/#:~:text=The truth is, there is,transferred to the various beneficiaries.

seem relevant. Your parents can check.

It would be wise to advise your bank  of the incoming gift. 

If you deposit the money in an interest bearing account see

https://www.gov.uk/apply-tax-free-interest-on-savings

Aretnap

dgerrard said:

I feel nervous about this though: is it true that they can gift me such a large amount with no tax consequences on either them or me?  I'm in full time employment currently. 

Can't comment on the situation in Canada. But it's certainly true as far as UK tax implications go. Gifts in the UK are not taxable. You can gift as much as you like, to whoever you like, and it's no business of the taxman's at all.

The one exception to this rule is that if you die within 7 years of making a gift then (subject to allowances and exceptions) it will still count as part of your estate for inheritance tax purposes, basically to stop people avoiding IHT by giving away everything they own on their deathbeds. But if your parents live permanently in Canada it would be Canadian inheritance tax (or lack of it) that mattered, not UK tax.

wmb194

Don’t waste your time forewarning the bank, it’ll tell you its fraud system works on a case by case basis. Just be prepared to prove the source of funds if asked.

Voyager2002

Please find out (and ask your parents to find out) about the exchange rate that will be used: banks usually take a fairly hefty percentage of funds transferred in this way, and with such a large amount the cost could be really significant. A little time spent investigating money transfer services could save you quite a lot.

Brie

fyi - there's no 7 year rule for IHT in Canada.  

friolento

Make sure you have

1 - documentary proof for the source of the money

2 - access to 1-2 months of money in an alternative account, in case your account gets blocked upon receipt of the gift. 

It may all go through without a hitch but best to be prepared.

Advising the bank beforehand of the expected deposit will make no difference. If it did, what would money launderers do?! Precisely 😎

Albermarle

Brie said:

fyi - there's no 7 year rule for IHT in Canada.  

Do you mean gifts are ignored or are always counted for IHT however long you live ?

Lorian

Further to friolento's point 2, consider sending it to a secondary current account rather than primary if you have a choice.

wmb194

Albermarle said:

Brie said:

fyi - there's no 7 year rule for IHT in Canada.  

Do you mean gifts are ignored or are always counted for IHT however long you live ?

According to this Fidelity.ca article there's no inheritance in Canada tax but a final tax return needs to be filed and so e.g., if the deceased had large unrealised gains on their shares portfolio CGT will be due, CGT on their home. That must be pretty annoying for the executors if decent records haven’t been kept.

https://www.fidelity.ca/en/insights/articles/canadian-inheritance-tax/