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taxadvisor.uk
taxadvisor.uk, Chartered Certified Accountant
Category: Tax
Satisfied Customers: 4972
Experience:  FCCA - over 35 years experience as a qualified accountant (UK based Practitioner)
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Good morning, I would like to know if You could help with

Resolved Question:

Good morning,

I would like to know if You could help with some account questions about international taxation and exchange of information between Italy and Uk.

I am of Italian origins but I am now living in the UK as permanent resident since 2003 and work full time. I have recently opened in Italy an international saving account as I have some money left as inheritance by my grandparents (value of around £ 40,000) that have been invested (invested in mainly Italian Bonds) and pay interests.

I would like to know the following please:

1.Do I have to declare this account to the HMRC?

2.If I have to declare such account do I need to declare the invested amount? Or do I only have to declare the interest gained?

3.Do I need to pay taxes in the UK - I know that I already pay the taxes in Italy

4.What will happen if I don’t declare this account to the HMRC? Will the tax office in Italy contact the HMRC about such account and vice versa? There are no major movement made on this account only the interest paid on an annual basis.

5.Is there exchange of information between the two countries?

In addition please can you advise if I close this account in Italy and open a joined account with my brother who is resident in Italy and works in Italy how will the HMRC treat this account – since the main account holder will be my brother.

Please can you also advise what happens to inheritance money. If my dad resident in Italy transfers me inheritance money (prior to his death) how will this money be taxed? What would I pay on it as he already paid all the taxes in Italy?

Thank you
Kind regards
Greta
Submitted: 3 years ago.
Category: Tax
Expert:  taxadvisor.uk replied 3 years ago.
Hello and welcome to the site. Thank you for your question.

I would like to know the following please:

[q]
1.Do I have to declare this account to the HMRC?

[a]
As a UK resident for tax purposes, you are taxed on worldwide income and capital gains. So any income arising from this account should be declared on your tax return and you claim foreign tax credit relief against any tax suffered on it abroad.

[q]
2.If I have to declare such account do I need to declare the invested amount? Or do I only have to declare the interest gained?

[a]
You declare the interest earned on this amount and not the actual amount invested.

[q]
3.Do I need to pay taxes in the UK - I know that I already pay the taxes in Italy

[a]
Yes, this income would be chargeable to income tax in the UK. As explained in 1 above, you claim foreign tax credit relief against tax suffered in Italy.

[q]
4.What will happen if I don’t declare this account to the HMRC? Will the tax office in Italy contact the HMRC about such account and vice versa? There are no major movement made on this account only the interest paid on an annual basis.

[a]
If you were not to declare the foreign income, the consequences resulting from tax enquiry may result in you paying fines and penalties for non disclosure. There are arrangements in place between HMRC and tax authorities in other countries whereby information is exhanged between them. My advice to you would be to declare the interest received as your tax on it will be 20% unless you are a higher rate tax payer.

[q]
5.Is there exchange of information between the two countries?

[a]
To the best of my knowledge, there would be some exchange of information between the tax authorities but HMRC is not going to tell you what information is being exchanged.

[q]
In addition please can you advise if I close this account in Italy and open a joined account with my brother who is resident in Italy and works in Italy how will the HMRC treat this account – since the main account holder will be my brother.

[a]
If you were a joint account holder with your brother, then you are liable to tax on your share of the interest only. If you had an agreement in place confirming he was the beneficial owner of the amount then you would not pay tax on the ineterst as it would be deemed to be 100% his share.

[q]
Please can you also advise what happens to inheritance money. If my dad resident in Italy transfers me inheritance money (prior to his death) how will this money be taxed? What would I pay on it as he already paid all the taxes in Italy?

[a]
You as a recipient of the money would receive the gift tax free as in the UK, gifts are tax free in the hands of the recipient. There will be no tax payable.

I hope this is helpful and answers your question.

If you have any other questions, please ask me before you rate my service – I’ll be happy to respond.


Customer: replied 3 years ago.


Good afternoon


 


Thank you for your answer. There are a couple of points I would like to clarify please:


 


1) Please do you have a link to the tax return form? Is it easy to fill in or would it best to get an accountant to do it for me?


2) When do I need to declare these interests by? is there a deadline


3) At the moment I am on a basic rate of income tax of 20% but next year I might be in the higher rate.


Does it means that the interests gained will aslo be taxed at 40%?


4) In the case of inheritance gifts you have advised that the gift is tax free. I thought that the max gift allowance is GBP 3,000. Is this correct? As this would be an inheritance gift the amount would be around 50K as my dad wants to sort this out while he is alive. would the 7 years rule apply to him? he is Italian residence and domicile in Italy.


 


 


Thank you


Kind regards


Daria

Expert:  taxadvisor.uk replied 3 years ago.
Daria, thank you for your reply.

[question]

Please do you have a link to the tax return form? Is it easy to fill in or would it best to get an accountant to do it for me?

[answer]

Completing a tax return is not that difficult to complete if your tax affairs are relatively straight forward. If your financial affairs are not straight forward, then you would be best adviced to seek assistance of a qualified accountant. You can download the tax return from HMRC website and the link is here

http://search2.hmrc.gov.uk/kb5/hmrc/forms/view.page?record=ZrJXAG2mt_0&formId=2999

[question]

When do I need to declare these interests by? is there a deadline

[answer]

The deadlines for filing tax return for tax year 2013-14 (year ended 5 Apr 2014) are as follows:

A paper return has to be filed no later than 31 Oct 2014

The deadline for filing the tax return online is 31 Jan 2015

[question]

At the moment I am on a basic rate of income tax of 20% but next year I might be in the higher rate.

Does it means that the interests gained will aslo be taxed at 40%?

[answer]

If your income puts you into higher rate of tax i.e. 40% then any part that is in excess of the threshold for basic rate would be taxed at 40% including interest received.

[question]

In the case of inheritance gifts you have advised that the gift is tax free. I thought that the max gift allowance is GBP 3,000. Is this correct? As this would be an inheritance gift the amount would be around 50K as my dad wants to sort this out while he is alive. would the 7 years rule apply to him? he is Italian residence and domicile in Italy.

[answer]

Gifts of upto £3,000 in total to an individual are exempt from IHT as far as it relates to the donor.

The seven year rule would apply to the gift mentioned above if your father was domiciled in the UK. If he is not resident and not domiciled in the UK then seven year rule would not apply.

You will find helpful information here

http://www.which.co.uk/money/tax/guides/inheritance-tax-explained/inheritance-tax-thresholds-rates-and-who-pays/


I hope this is helpful and answers your question.

If you are happy and there are no more issues I will appreciate if you would kindly rate the service I provided to ensure I get credited for it.

taxadvisor.uk and other Tax Specialists are ready to help you
Expert:  taxadvisor.uk replied 3 years ago.
I thank you for accepting my answer.

Best wishes

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