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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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My wife is an Indian Citizen but hold a permanent resident

Resolved Question:

My wife is an Indian Citizen but hold a permanent resident status in UK and have been living here for the past 10 years. I am a British Citizen originally from India, working for a company in the UK. If my wife wants to send some money as (Gift or maintenance and saving) from an Indian bank account to my UK account, Do I have to pay tax? She hasn't been working for the past 6 years and the source of money is by selling of shares that she held over a long period. The tax is exempted in India because it falls under a category called LONG TERM CAPITAL GAINS.
Submitted: 1 year ago.
Category: Tax
Expert:  TonyTax replied 1 year ago.
Hi. Can you tell me how much the profit on the disposal of the shares will be please.
Expert:  TonyTax replied 1 year ago.
Hi. Can you tell me how much the profit on the disposal of the shares will be please.
Customer: replied 1 year ago.
She got the shares for roughly 1600 pounds but this was when she was working in India through her Indian earning. Now after 12 years the sale value of the share are worth 15500 GBP approximately.
Expert:  TonyTax replied 1 year ago.
Thanks.
Leave this with me while I draft my answer.
Customer: replied 1 year ago.
Basically she wants to bring the money here to UK from India and I am looking at the best way to go about this. I know you can transfer freely between spouses if you are UK domicile, which we both are but she is transferring money from an Indian bank account and I want to know if the tax exception in UK applies in this case. She also has the option to transfer to her own Bank account in UK but I don't know what the tax implications are. Please let me know what is the best way to go about it.
Thanks,
Dinesh
Expert:  TonyTax replied 1 year ago.
Hi again.
You should refer to section 9 of RDR1 here:
https://www.gov.uk/government/publications/residence-domicile-and-remittance-basis-rules-uk-tax-liability
As your wife is non-UK domiciled and has been in the UK for at least 7 of the previous 9 tax years, if she chose to only pay UK tax on UK income and on non-UK income and capital gains which she remitted to the UK, then she would be liable for the remittance basis charge of £30,000 which you can read about in paragraph 9.32 of RDR1. Unless she has substantial non-UK income and/or gains, she will be better off paying UK tax on her worldwide income and gains.
The capital gain from the sale of the shares will be £13,900 (£15,500 - £1,600). The first 11,100 will be tax free assuming the disposal is in the current tax year so your wife will pay CGT at 18% on £2,800 (£504.00) if she brings it into the UK.
As the gift to you will be from a non-UK source assuming it comes direct to you from India, then it won't have Inheritance Tax implications for your wife in the UK. You won't pay tax on it as it is a gift but as stated above, there will be CGT to pay by your wife regardless of the fact that the cash will be gifted to you.
I hope this helps but let em know if you have any further questions.
Customer: replied 1 year ago.
>As your wife is non-UK domiciled and has been in the UK for at least 7 of the previous 9 tax years.Why do you think she is a non-UK domiciled, She is on an Indefinite leave to remain visa and a permanent resident in the UK and we've been living here for the past 10 years. The definition of Domicile is very confusing.>As the gift to you will be from a non-UK source assuming it comes direct to you from India, then it won't have Inheritance Tax implications for your wife in the UKWhat are the Inheritance Tax implications, when she is transferring her funds from India to her own bank account in UK? Given that she hasn't Inherited any funds and it's her own investment.
Expert:  TonyTax replied 1 year ago.
Domicile is confusing. See section 5 of RDR1 here. If your wife wishes to claim that she is UK domiciled then she won't get an argument from the UK government because it opens up her worldwide assets to UK Inheritance Tax when she dies. The executors of a non-UK domiciled individual only pay UK IHT on UK based assets excluding UK bank accounts denominated in non-UK currency. The point I was making was that by transferring the cash into her UK account before passing it to you brings it into the UK IHT net. If she gifts it to you, then it will be an exempt gift so there won't be any IHT in any event but if it remains in her account, it becomes part of her UK estate. It would be tidier to make the gift direct to your account from India. If its just a one-off then it won't be problematical from a record keeping point of view but the tax affairs of non-doms can get complicated if there are constant movements of cash and assets from abroad the and the system of identification for tax purposes is very complicated.
Customer: replied 1 year ago.
Hi Tony,Thanks for you a response it has taken me a while to digest the information. You said she will havr to still pay UK capital gains even if she has transferred the money as gift directly from India to my UK bank account. If she ends up declaring the gains to UK does it automatically make her a Domiciled to UK?Given that in India tax is exempted, shouldn't this come under the double taxation agreement between India and UK. I am adding a file about DTA for your reference and this is what an Auditor in India has to say."PFA the DTAA that India and UK has signed.
Refer Article 14 which talks about Capital gains where its clearly spelt out that the contracting state will tax capital gains according to its domestic law. i.e In case of a capital gains arising in India, it will be taxed as per Indian Tax laws and UK will not have any jurisdiction over it and vice versa.
As a tax resident of UK, you will have to declare your global income in UK. However, you will not be required to pay any taxes on the capital gains that you made in India as UK does not have any jurisdiction."
Expert:  TonyTax replied 1 year ago.
It doesn't make your wife domiciled in the UK by importing a capital gain in to the UK. If you could avoid CGT by giving a gain away, we would all do it. What the taxpayer does with a gain is up to them. The fact that a gain is exempt in India doesn't necessarily make it exempt in the UK. UK tax rules are made in the UK, not India and vice versa. Article 14 is very simple. It says that each country may tax capital gains in accordance with its domestic (local) law. In the UK, the domestic law says that in the case of a non-UK domiciled individual a capital gain imported into the UK will be taxable in the UK with credit being given for any tax paid on the same gain in India. If your wife is UK domiciled, the domestic law says that she will be taxable on her worldwide income and gains regardless of whether they are imported to the UK or not with credit being given for non-UK tax paid on the same income or gains. None of "In case of a capital gains arising in India, it will be taxed as per Indian Tax laws and UK will not have any jurisdiction over it and vice versa. As a tax resident of UK, you will have to declare your global income in UK. However, you will not be required to pay any taxes on the capital gains that you made in India as UK does not have any jurisdiction." is in Article 14. However, the key words are "vice versa". The UK does not have jurisdiction over if and how a gain in India is taxed and vice versa. That doesn't make the gain non-taxable in the UK.
Expert:  TonyTax replied 1 year ago.
Correction:None of "In case of a capital gains arising in India, it will be taxed as per Indian Tax laws and UK will not have any jurisdiction over it and vice versa" appears in Article 14.
Customer: replied 1 year ago.
Thanks for answering my questions, It's almost clear now. One last clarification.
I came across the following article.
https://www.brewin.co.uk/insight/financial-planning/ten-ways-to-reduce-your-capital-gains-tax-liabilityPoint number 3 states as follows.
"Transfer between spouses is currently exempt from CGT. This means that assets can be transferred between husband and wife or civil partners so that both annual CGT allowances are used. This effectively doubles the CGT allowance for married couples and civil partners. The transfer must be a genuine, outright gift."It says, it doubles CGT allowance for married couples. Does my case some under this criteria, I am struggling to relate how this applies to my case.
Expert:  TonyTax replied 1 year ago.
If the asset has yet to be sold, you can put it into joint names with your wife so that you each sell half and each get to use the annual CGT exemption of £11,100 that each individual has in each tax year.
TonyTax and other Tax Specialists are ready to help you
Customer: replied 1 year ago.
Thanks Tony
Expert:  TonyTax replied 1 year ago.
Thanks and good luck.