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Sam
Sam, Accountant
Category: Tax
Satisfied Customers: 13975
Experience:  26 HMRC expertise, PAYE, Self Assessment ,Residency, Rental Income, Capital Gains, CIS ask for Sam Tax
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Iht and gifts from people presently domiciled outside the UK

Customer Question

iht and gifts from people presently domiciled outside the UK but looking to move back in the future
Assistant: Thank you. Can you provide any more details to help us find you the right Expert?
Customer: My mother who has lived in the isle of man for c20 years is thinking of moving back in the next few years. She is thinking of giving most of her assets (held in the isle of man) to her children prior to moving back to the UK. Would this exclude the gifts of the assets from IHT calculations after she returns to the UK?
Submitted: 1 year ago.
Category: Tax
Expert:  Sam replied 1 year ago.

Hi

Thanks for your question - I am Sam and I am one of the UK tax experts here on Just Answer.

As you use the phrase "moving back to the UK" then I am assuming your mother is a British citizen - is that right? May I ask the value of the gifts she would like to make - and what value will remain on her estate when back in the UK and whether she is a widow?

Thanks

Sam

Customer: replied 1 year ago.
Mother born in Britain but now domiciled in the Isle of Man. (has lived there for c20 years, owned business there, paid taxes there and fulfilled criteria to be Isle of Man domiciled).
She is a widow.
Value of gifts c£2M value of estate remaining c£1M
Expert:  Sam replied 1 year ago.

Hi

Thanks for your response

Then as she is still deemed to be a British citizen, should she die in the UK then her whole position of estate will fall within the UK jurisdiction and this includes any gifts she makes, if they fall within 7 years of the date of the gift(s) being made and her death.

If more than 7 years (and she makes no further use if we are referring to property or makes use of but pays the market value of rent) then these drop from consideration of her estate - if less than 7 years then they are included for IHT purposes, but taper relief would apply - the longer gap there is between the date of making the gift and her passing away and I have added a link here regarding taper relief and how it is applied

https://www.gov.uk/inheritance-tax/gifts

However a consideration also can be made for any unused IHT band left over by her late husbands estate which can be added to her £325,000 Nil band -

But as she has a £1 million estate left over even after making gifts there will still be some IHT to pay although another new part of IHT legislation comes into play from April 2017 regarding the main residence and passing to a direct descendant or downsizing - and I have added a link below which provides a more detailed overview

https://www.gov.uk/inheritance-tax/passing-on-home

So this may also allow a furtehr way to mitigate some of the IHT position.

The other is to make use of the gifts that can be made annually without any IHT affect - be it though these are small in amounts - but again just help make use of the existing framework - a link here to cover all the "free" gifts that can be made and not affect the final IHT position

£3000 a year plus one carry forward from last year - allowing £6000 to be made this year then £3000 thereafter - along with regular small gifts the key is these gifts must come from day to day living rather than savings and capital -

But again to reiterate, as your mother is a British citizen despite her domicile out of the UK - does not change the jurisdiction under which she will fall for IHT purposes

Let me know if I can assist further - but it would be appreciated if you could rate me for the level of service I have provided (or click accept)

Thanks

Sam

https://www.gov.uk/inheritance-tax/gifts

Customer: replied 1 year ago.
can you tell me why she is considered a british citizen when not living here and not been for over 20 years?
Expert:  Sam replied 1 year ago.

Hi

Because

1) she was born here

2) She plans to come back to the UK where I would infer from what you advsie she may well pas away here

3) Her estate will fall within UK jurisdiction for both 1 and 2 reasons even though all gifts made may well arise from monies and possessions gained when not in the UK and made prior to her return to the UK

Thanks

Sam