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TonyTax
TonyTax, Tax Consultant
Category: Tax
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Experience:  Inc Tax, CGT, Corp Tax, IHT, VAT.
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Hello, my wife is a citizen of Iran living and working in London

Customer Question

Hello, my wife is a citizen of Iran living and working in London with a Tier Two general visa. Her father is planning to transfer, from a bank in Iran, to her account in the UK some $600,000 as a gift, which she intends to transfer to me in the US. My question is would that create any tax implications for her.

Thanks
Submitted: 2 years ago.
Category: Tax
Expert:  TonyTax replied 2 years ago.
Hi.

Can you tell me whether you are UK or non-UK domiciled please.




Customer: replied 2 years ago.

Non-UK. I am an Iranian citizen and a US permanent resident.

Expert:  TonyTax replied 2 years ago.
Thanks.

Leave this with me while I draft my answer.
Expert:  TonyTax replied 2 years ago.

Hi again.

The recipients of gifts do not pay tax on them in the UK. As your wife's father is transferring the money from Iran, it is not being gifted out of UK based assets he may own so there should be no Inheritance Tax implications for his esate should he die within seven years of making the gift. When a non-UK domiciled individual dies, only their assets based in the UK are liable to Inheritance Tax in the UK. UK based bank accounts denominated in non-UK currency are excluded.

Transfers of assets or cash between married couples are exempt from Inheritance Tax. However, it would make things simpler if the money was deposited in a non-UK denominated currency account in the UK in your wife's name before being transferred to you in the US. Your wife should also alert her bank in advance of the transfer from Iran to avoid delays caused by UK bank anti-money laundering regulations. She might also ask her father to write her a letter confirming the gift so that she has proof of the origin of the money.

 

UK Inheritance Tax is based on the domicile of the individual. Take a look here for information on deemed domicile.

I hope this helps but let me know if you have any further questions.

Customer: replied 2 years ago.

Just to be clear, you mean she should open a foreign currency account? Because that is what we are intending to do.

Expert:  TonyTax replied 2 years ago.
That is what I meant, yes.
Customer: replied 2 years ago.

I don't understand what you mean by "there should be no Inheritance Tax implications for his esate should he die within seven years of making the gift." Do you means there will be implications for his estate if he does not die within seven years of making the gift? Please explain. Thanks

Expert:  TonyTax replied 2 years ago.

Under UK IHT rules, should somebody die within seven years of making a gift, their estate will include the value of assets held at the time of their death and the value of gifts made in the seven years before death. Any gifts made longer than seven years before death are excluded unless a particular set of circumstances is in place which I won't bore you with.

As your father in law is not UK domiciled only his UK assets if he has any will be included in his estate when he dies for the purposes of UK IHT and this will include the value of gifts made from UK sources in the seven years before death.

The point I was trying to make was that, as the gift to your wife by her father is being made from a non-UK source, there will be no UK IHT implications for her father's esate should he die within seven years of making the gift as it will have been made from a source beyond the reach of the UK IHT system. There will be no UK IHT implications should he live beyond seven years after making the gift.

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