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bigduckontax
bigduckontax, Accountant
Category: Tax
Satisfied Customers: 3817
Experience:  FCCA FCMA CGMA ACIS
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I have now received the monies from my Charge against the

Customer Question

I have now received the monies from my Charge against the ex-family (my ex-wife's) home.
The Charge was 50% of the net sale of my ex-wife's home.
I am dividing the monies between my three children (all adults).
My logic is, if I had remained married, they would have been the beneficiaries of the family home on my death.
Two live outside of the UK and their transfer has no tax implications.
The third (younger) lives in the UK and the transfer will be £80,000.
The value is derived 100% from her share of the Charge against the property.
Is there a perfectly legal way the make the transfer UK tax free?
Oh! I currently live outside the UK also (China).
The transfer will be from a UK bank offshore account.
Submitted: 1 year ago.
Category: Tax
Expert:  bigduckontax replied 1 year ago.
Hello, I am Keith, one of the experts on Just Answer, and pleased to be able to help you with your question. Gifts are outside the scope of UK taxation. Thank your lucky stars you don't live in France where Gifts Tax kicks in at 5K Euros! However, they do create a Potentially Exempt Transfer (PET) in your UK Inheritance Tax (IHT) affairs. PETs run off over seven years at a taper and in the event of your demise within that period are added back to your estate for IHT purposes and are the first to suffer tax. In the event of your estate being insufficient to meet any IHT on the PET the liability cascades down to the beneficiary for immediate payment. IHT starts at 325K and is at a 40% flat rate on the surplus. Under the new rules in 2015 a family house will increasingly be free of IHT up to one million, but, of course, this doe not apply here. Non residents can still be liable for UK IHT. I think you might find it helpful to read this guidance from Experts for Expats which explains the situation: http://www.expertsforexpats.com/expat-tax/inheritance-tax/ As a final point when you left for China did you complete a Form P85 ad send it to the taxman? If you did not do so then you should send one in immediately. Fortunately there is no time limit on its submission, it is available of the web and can be filed on line. On receipt HMRC will classify you as non resident. You, or your executors, will find dealing with HMRC much easier if you use the P85. I do hope that my reply has been of assistance.
Customer: replied 1 year ago.
Thank you vey much for your detailed reply and the additional information outside of the question.
very acceptable.
Thank you again
David
Expert:  bigduckontax replied 1 year ago.
Delighted to have been of assistance, David. Pleas be so kind as to rate me before you leave the Just Answer site.
Customer: replied 1 year ago.
Ref: "The third (younger) lives in the UK and the transfer will be £80,000."
She and her husband are looking to purchase a house in the UK.
If I paid the £80K as the house deposit (part or all), is that still classified under PET; being monies derived from sale of property to purchase of property?
Thank you
David
Expert:  bigduckontax replied 1 year ago.
No, it is still a gift, David and thus a PET created. The classic defence against a PET is, of course, a decreasing term life insurance, but of course your age might make the premiums prohibitive.
I have noticed a couple of typos:
Paragraph 2, line 5; delete 'doe,' insert 'does.'
Second response Paragraph 2; add an 'e' to the 'Pleas!'
bigduckontax and other Tax Specialists are ready to help you
Expert:  bigduckontax replied 1 year ago.
Thank you for your excellent support.
Customer: replied 1 year ago.
Only saw the 2nd typo!
Insurance - nice idea - but at 76yrs young? Hmmmmm, might just look at it anyway.
Thank you again.
David
Expert:  bigduckontax replied 1 year ago.
Well don't say I didn't warn you, David!

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