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bigduckontax
bigduckontax, Accountant
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Whats the law with an australXXXXX XXXXXving in London receiving

Customer Question

Whats the law with an australXXXXX XXXXXving in London receiving a financial gift from parents in Australia, is there gift tax owed? as there's no gift tax in austrlia
Submitted: 3 years ago.
Category: Tax
Expert:  bigduckontax replied 3 years ago.

Hello, I'm Keith and happy to help you with your question.

 

Nor is there a gift tax in the UK. A gift is outside the scope of UK tax. It does create a Potentially Exempt Transfer (PET) in your parents estate in the UK were it subject to Inheritance Tax (IT) and above 325K on demise. As I do not know your parents residency or domicile I cannot comment on any IT liability.

 

The transfer may be investigated by the authorities as part of the precautions against money laundering.

 

Once the money is in the UK and invested then any income would be subject to Income Tax and have to be reported in the annual self assessment return.

Customer: replied 3 years ago.

Thanks, XXXXX XXXXX live in australia. So it would only be liable for tax if it was after they died, as then its IT, is that correct?


 

Expert:  bigduckontax replied 3 years ago.
Yes IT would kick in if the UK estate exceeded 325K, but if she is resident in Australia then this is an increasingly unlikely prospect and if she has no UK estate then, in Aussie terms, no worries.

I cannot give an opinion on Australian Tax. However taxes there are levied by State or Territory and thus the matter increasingly complicated.
Customer: replied 3 years ago.

thanks. so if it's just a gift now and parents are still alive (so it's not inheritance) and we then pay tax on whatever interest is earned on it before it was spent then there shouldn't be any further tax implications, is that correct? does it have to be less than £325k or is that only if it's inheritance

Expert:  bigduckontax replied 3 years ago.
Not quite; the only danger is the PET should your parents have UK estate over 325K on death and also be subject to UK tax. Then the PET, which runs for 7 years on a taper, kicks in and is added to their estate for IT purposes. If the estate is over 325K then the surplus is taxable at 40% flat rate and if the estate has insufficient funds to meet the PET then it cascades down to the beneficiary for immediate payment. However, that is only the case if your parents are subject to UK IT which, I have said, appears highly doubtful..
Customer: replied 3 years ago.

Thanks, XXXXX XXXXX to assume that as my parents have no UK estate and are currently living in australia ( no intention of living in the UK) then this gift is not liable for tax, just whatever interest is earned on it before it's spent or used will be declared here as tax ( even though i don't earn an income in UK) When they do die though if i'm to receive an inheritance it will be taxed at 40%.

Expert:  bigduckontax replied 3 years ago.
Correct, the gift is tax free.

However, you are misinformed about what happens on their demise. The taxation position is an Australian State or Territory matter. There is no tax in the UK on bequests made to any person in receipt thereof. You will receive yours tax free.
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Expert:  bigduckontax replied 3 years ago.
Thank you for your support.

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