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bigduckontax
bigduckontax, Accountant
Category: Tax
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I am domiciled (by HMRC definition), resident and ordinarily

Customer Question

I am domiciled (by HMRC definition), resident and ordinarily resident in the UK. On the other hand, my father (age 71) is not domiciled, not resident and not ordinarily resident in the UK. He has significant amount of non-UK assets, some of which he wants to transfer to me in the UK as cash gift. Is the transfer of asset subject to UK tax? Part of his asset is held in a non-UK discretionary trust. If I receive a cash capital distribution from this non-UK trust, am I subject to UK tax?
Submitted: 3 years ago.
Category: Tax
Expert:  bigduckontax replied 3 years ago.
Hello, I'm Keith and happy to help you with your question.
Gifts are outside the scope of UK taxation.
The cash capital distribution may well expose the trustees to a Capital Gains Tax charge. The distribution to you as a beneficiary will be taxable as income, but as the trustees will have deducted the tax from any distribution at the basic rate then the moneys received are effectively tax free whilst you remain a basic rate tax payer. If you move into higher brackets then the distributions will be grossed up to in your taxation computation to arrive at the correct position.
However, I must insert a word of caution. Trusts are exceedingly complex and you may need local professional assistance in the matter of distributions from a trust. The situation of any local taxation in the country of your Father's residence is beyond the scope of this essentially UK orientated site.
Customer: replied 3 years ago.

If my father pass away within 7 years, is the cash gift then liable to inheritance tax? Or does him being non-resident and non-domicile exempt the gift from inheritance tax regardless?

Expert:  bigduckontax replied 3 years ago.

Here is the HMRC guidance [edited] on assets of non residents non domiciled in the UK:

'If you are domiciled abroad, inheritance tax applies only to your UK assets.'

As this cash gift was derived from moneys outside the UK taxation area then the Inheritance Tax rules for Potentially Exempt Transfers appear inapplicable, such moneys being outside the scope of UK taxation.

Apologies for the slight delay in response to your follow up question.

bigduckontax and other Tax Specialists are ready to help you
Expert:  bigduckontax replied 3 years ago.
Thank you for your support.

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