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TonyTax
TonyTax, Tax Consultant
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Experience:  Inc Tax, CGT, Corp Tax, IHT, VAT.
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My elderly relation has a UK passport but lives overseas for

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My elderly relation has a UK passport but lives overseas for approximately 9 months of the year. Until two years ago she owned a flat in the UK which she has now sold and when she is here she lives with her niece (she has no children). She pays a utility bill at that house and contributes to the upkeep of that home. She has not worked in the UK since the mid 1950s so is not registered for tax. She has a small income (around $14,000 per year) from a house she rents out in her country, plus a large lump sum from the sale of the UK flat. Her British bank recently closed her account and she is now having trouble opening another in which to deposit both this and her income. I am wondering if she is entitled to become a UK taxpayer, and how she would go about this?
Submitted: 2 years ago.
Category: Tax
Expert:  TonyTax replied 2 years ago.
Hi.

Can you tell me where your relative lives for most of the year please. Is she a UK national? Was a reason given by the bank for the closure of her UK bank account?
Customer: replied 2 years ago.

Hi there.

Yes, she lives in Sudan. She was married to a Sudanese national, since deceased. She is a UK national, born here. The bank did not go into detail in their letter but as I understand it the reason is that British banks don't want to do business with Sudan for political/financial reasons so they made a blanket decision to close the accounts of people with ties to that country. The same thing happened to her account at Barclays Bank a few years ago. She is 89.

Expert:  TonyTax replied 2 years ago.
Thanks.

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

Hi again.

I'm not sure I will be able to advise you on how your relative can open a UK bank account given the problems she has experienced in the past and more recently but it does surprise me a lttle given that she has a UK passport and is a UK national. It seems that UK banks are even closing the accounts of UK companies which do business with Sudan from my research. It may be the banks are saying that your relative needs to have a UK tax reference before they will open an account for her or that she needs a UK source of income, hence your question.

Registering for UK tax is not really based on choice so much as on whether an individual has any UK based income sources such as a job, a business or rental income from a UK property, amongst others. It is possible to be tax resident in the UK with no income as in the case of millions of non-working spouses or partners.

Take a look here and here for the rules which determine UK tax residency. The summary behind the second link is probably sufficient for your purposes and easier to follow. Given that your relative spends just three months a year in the UK, she is almost certainly not going to be treated as tax resident in the UK aqs she does not have sufficient ties to the UK. Based on her circumstances, she would probably need to spend over 182 days in the UK in a tax year to be treated as UK tax resident. If she became UK tax resident, then she could register for self-assessment by completing a form SA1 and be issued with a UTR or Unique Tax Reference. Whether that would help her open a UK bank account or not I couldn't be certain given the banks attitude to Sudan and people connected to Sudan.

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

Customer: replied 2 years ago.

Thank you. Sorry if this falls outside the remit of my original question, but do you know if she were eventually able to get the cheque made payable to a third party, would that person (a UK taxpayer) be liable to capital gains tax on that money? And if they were to pass on some of that money to other parties (my aunt's heirs in fact - two of whom live in France, the other in the UK) would they only pay it on the sum they hung on to, or on the whole sum?

Expert:  TonyTax replied 2 years ago.

If your relative effectively gifted the money to a third party, the UK taxpayer, that UK taxpayer would not have any UK tax to pay on the gift as gift recipients do not pay tax on them. If that person was merely a conduit to pass the money to your relative's heirs because of the banking problem, then the money would not be a gift to them in any event so there would be no tax issue whether they held on to any of it or not. It would make sense, however, for all this to be documented so the UK taxpayer can explain the sequence of events if asked by their bank or the tax office.

Any gifts made by your aunt in the seven years before she dies will be included in her estate for Inheritance Tax purposes. If she is UK domiciled, her worldwide estate will be liable to IHT in the UK. If she is no longer treated as UK domiciled given how long she has lived abroad, then only her UK based estate and gifts from UK sources in the seven years before she dies will be liable to UK IHT.

Take a look here and here for information on IHT in the UK.

Customer: replied 2 years ago.

Ok, thanks so much, this is all fantastically helpful. Final question: if my aunt were able to have the rental income from her house in Sudan, which is paid by the British Council in London, paid into my sister's bank account in the UK (instead of her old personal account), would my sister a) pay tax on that, and b) be doing anything dodgy which is liable to get her into trouble?

Expert:  TonyTax replied 2 years ago.
If the Sudan rental income was still owned by your aunt, then your sister would have no tax to pay but you would need to ensure you documented the arrangement. Her bank may not be too keen on having money which wasn't hers paid into her bank account due to money laundering laws so you need to be careful and maybe take it up with them.
TonyTax, Tax Consultant
Category: Tax
Satisfied Customers: 15838
Experience: Inc Tax, CGT, Corp Tax, IHT, VAT.
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