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TonyTax
TonyTax, Tax Consultant
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Experience:  Inc Tax, CGT, Corp Tax, IHT, VAT.
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I am currently co-founding a startup company and

Resolved Question:

Hello,
I am currently co-founding a startup company and so I have been appointed director and, as such, will have to file a personal tax return in Jan 2017.
Meanwhile, my mother-in-law (who is in China) has sent £500,000 to my UK account for the purposes of buying a house here in the UK. My wife is not a UK national and not currently in the UK, so the plan was to put the house in my name (to save the hassle of sending documents to and from China for signatures) and then transfer the house to my wife's name later, when she comes to the UK.
My question is, if the house is in my name will I have to declare it on my tax return? If so, will I have to pay tax on it (in addition to stamp duty)? Will I have to pay tax anyway, because I have received £500k into my account, even though the money isn't my own?
Many thanks!
Submitted: 1 year ago.
Category: Tax
Expert:  TonyTax replied 1 year ago.
Hi. Gifts are not taxable on the recipient in the UK except in exceptional circumstances. Assuming your mother in law has no UK assets, she is beyond the reach of the UK Inheritance Tax system so even the exceptional circumstance could not arise. You don't need to to dislcose the cash gift in your tax return though it would be a good idea to have your mother in law confirm in writing to you that she has made a gift so that you can prove the origin of the money if asked about it. You should also warn your bank in advance of the transfer to minmise the possibility of delays in accessing it due to the bank's money laundering procedures. When you transfer the house to your wife, it would normally be exempt from IHT under the spousal exemption rules. However, where the receiving spouse (your wife) is non-UK domiciled, the IHT exemption only covers the first £325,000. If the property is worth more than that when it is transferred and you die within seven years of amaking the gift, the excess over £325,000 will be charged to IHT at 40% but this reduces from the end of the third anniversary after the making of the gift as you will see here. You could insure against the possibility of an IHT liability using a terma assurance policy with reducing cover as the risk of an IHT liability diminishes. After seven years, the gift vale falls out of your estate altogether and your have the £325,000 nil-rate band back. Take a look here and here for information on intra-spouse transfers where the receiving spouse is non-UK domiciled. Your wife could elect to be treated as UK domiciled so that any intra spouse gifts are completely IHT exempt, though this would bring any non-UK assets she owns into the UK IHT net. I hope this helps but let me know if you have any further questions.
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Customer: replied 1 year ago.
Very helpful, thanks Tony.

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