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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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Tony, My question is a bit complicated. Its about land in my country of birth. My late

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Hi Tony, My question is a bit complicated. Its about land in my country of birth. My late father who was never a resident of UK, bought the land in 1962 before he left the country and registered in my mother's name. My father worked for U.N and became stateless and held blue United Nations passport while he was alive. My mother and 4 brothers left Burma in 1971 to Cyprus, finally coming here to UK in 1974. My late father bought a house in london in 1976 while working for U.N and never paid Tax here. My mother resides here in London. The land might be available for sale in the near future. I would like to know whether my mother or will be liable to capitalgains tax, and if she passed the proceeds of the land to myself and 4 brothers what tax will we be liable? Myself and one other brother are residents of UK, the others resides in Australia and USA.
Thanks.
Submitted: 2 years ago.
Category: Tax
Expert:  TonyTax replied 2 years ago.
Hi.

Can you tell me what youtr own and your mother's nationality is please.
Customer: replied 2 years ago.

I am UK citizen from 1991/2 and my mum became UK citizen from about 1996. She also hols a Bumese citizenship.

Expert:  TonyTax replied 2 years ago.
Thanks.

Leave this with me while I draft my answer. It will take a while.
Customer: replied 2 years ago.

I believe the proceeds of the land can be deposited in an offshore account and declared to HMRC and not bring it to UK so no UK tax will be applied, is rthat correct? What if the proceeds are shared out between my four brothers and myself?

Expert:  TonyTax replied 2 years ago.
I'm back.

You will need to refer to RDR1 here which deals with residence, domicile and remittances.

The fact that your mother is a UK citizen doesn't necessarily make her UK domiciled. If she isn't UK domiciled, then she can choose to leave the disposal proceeds of the land abroad and pay no UK tax. However, as she is a long term UK resident, that will leave her liable to the remittance basis charge for any tax year she chooses to be taxed on the remittance basis which you can read about here (new rates).

If she chose to bring the money into the UK or is UK domiciled in which case it doesn't matter if the money is brought to the UK or not, then any gain will be subject to CGT in the UK. For this purpose, the 31 March 1982 value of the property will be the cost for CGT purposes. There are two rates of CGT, 18% and 28%. The rate or combination of rates paid will be dependent on the level of the individual's income in the tax year the gain is made.

The disposal proceeds will become part of your mother's estate for Inheritance Tax purposes. She has been in the UK for 40 years so she is deemed to be UK domiciled for IHT purposes. Should she then give the cash away, she will be making gifts which will cease to be part of her estate should she live for seven years after making them. A form of tapering can reduce IHT liabilities on gifts made in the seven years before death as you can read here. A term assurance policy can be used to cover an IHT liability but the older the life assured the more expensive it will be. The gift recipients will not be liable to UK tax unless the donor (your mother) died within seven years and the estate could not pay all the IHT due.

I hope this helps but let me know if you have any further questions.
Customer: replied 2 years ago.

Hi Tony,

What makes this complicated is the fact that according to the government there the land has no deeds as such nobody owns it. My Uncle who lives on one half of our land for over 50 years said he had paid my late father to acquired it over 50 years ago. He tried to sell his half of the land in the past but without the deeds, he failed. Just over a year ago all my family went back to sort out this with a lawyer and my Uncle had agreed to sign and let my mother applied the deeds from the government. My mother has recently been granted the deeds to the whole of the land at a cost (Stamp duty, government fees etc) about US$400,000 which is paid for by an agent which we must pay back with interest. Also my Uncle as a sit-in tenant will have to be compensated. In a country where deals are made without proper paper

work it is difficult to prove how much cost and deductions need to make from the final sales figure. My question is does HMRC expect to see the sales figure as the final figure or other payoffs can be written off from the liable tax deduction? The land was accuired in 1962 and my mother arrived here in UK in 1974, so the capital gains tax should not be applied to those 12 years.

Expert:  TonyTax replied 2 years ago.
How much is the land worth now?
Customer: replied 2 years ago.

At the moment the government there is charging 10% sales Tax and 30% purchase Tax on land and properties above US$200,000. This has to be taken into account of any potential deals. My mother's land is valued at approximately US$8,000,000.

Expert:  TonyTax replied 2 years ago.
In view of the value of the land, I'd claim the $400,000 and the 10% sales tax along with the March 1982 value against the disposal proceeds. The purchase tax should be paid by the buyer I would have thought. However, HMRC may seek to disallow the $400,000 if they enquire into the declaration of the gain.

The double tax treaty between the UK and Burma (Myanmar) here does not appear to deal with capital gains which would appear to suggest there is no CGT regime in Burma. The treaty was in place before the introduction of CGT in the UK in 1965.

Given the size of the transaction, it may be worth your mother electing for the remittance basis of assessment for the tax year in which the land is sold and leaving the money offshore before gifting it to you and your siblings. It will cost her £90,000 but that can used against a future liability if any of the money if she retains any is brought into the UK by her in the future.

I'd also recommend that you consult an international tax specialist of which there are many in London who can look at the Burma situation in detail and, if necessary, to get the HMRC view. HMRC has a section that deals with international tax issues as they affect UK taxpayers. They will also advise on the remittance question as it is a complex area with many pitfalls for the lay person. Take a look here for some examples.
TonyTax, Tax Consultant
Category: Tax
Satisfied Customers: 15886
Experience: Inc Tax, CGT, Corp Tax, IHT, VAT.
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