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I feel you should go for option 2 and let your relative take care of the tax implication of cashing in the mutual fund.
When the cash is transferred to you in the UK, as recipient of a gift you would get it free of tax as there is no gift tax in this country.
Once you invest this sum here and then any future gains or interest would be subject to taxation in the UK.
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If the fund is transferred then you would be responsible for tax payable if any on encashment of it. YOu will report the gain on your tax return.
A gift does not have to be reported on a tax return.
A loan and repayment of it are out of scope of income tax.
I hope this is helpful.
A capital gain would attract tax at 10%, 20 % or a combination of both depending on your taxable income including the gain. You claim gain allowance of £11,100 against the gain before CGT is calculated.
There may be taxes payable in US but then you claim foreign tax credit relief against taxes suffered there as being a UK resident you are taxed on worldwide income and gains.
No gift tax in the UK.
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