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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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I'm a 63 year old retired civil servant living in Germany

Resolved Question:

Hi. I'm a 63 year old retired civil servant living in Germany having worked previously for the Army here. I receive a pension from the civil service paying uk tax.My wife is a German national and our children (26 &24) have duel nationality. I have a house in Uk which I rent out paying uk tax on the net income.
My question is can I be more tax effective with this?
Could I give the house to my wife (value approx 175k) or my children either before or after my death without cost? Then if they continued to rent; would they receive personal allowance on tax paid on its income?
Hope you can help.
Kind regards
Paul
Submitted: 1 month ago.
Category: Tax
Expert:  TonyTax replied 1 month ago.

Hi. My name is*****'m looking at your question now and will post my answer or ask for more information here in a short while.

Expert:  TonyTax replied 1 month ago.

I can only deal with the UK tax implications of your question. You would need to seek local advice as to the German tax implications of a gift of a UK property.

If you gave the UK property to your wife there would be no gain or loss as transfers of assets between the parties to a marriage are tax neutral in the UK as far as Capital Gains Tax is concerned. As your wife is an EU national, she would be entitled to a UK personal allowance to offset against the rental income. See Box 16 here on page RRN5 here. As your wife is non-UK domiciled, the intra-spouse gift rules for Inheritance Tax purposes are diffferent to those where both spouses are UK domiciled as you can read here.

If you gifted the property to your children, that would constitute a disposal for Capital Gains Tax purposes and you may have to pay CGT depending on how you choose to calculate the gain as a non-UK resident. See here and here for more information. It would also be a gift for Inheritance Tax purposes which would rermain in your estate for seven years after it is made. See here for more information. If you are UK domiciled, your worldwide estate is liable to UK IHT whereas if you are not UK domiciled, only your UK based estate is liable to UK IHT. See section 5 of RDR1 here.

I hope this helps but let me know if you have any further questions.

Customer: replied 1 month ago.
Thank you for your prompt and detailed response to date.
.
I have the following points;1.You say you can't answer the German tax part but would it not be possible for you to refer to a colleague in the German Justanswer section for that. (other wise I will have to do it and pay again)!
2. Will my children receive a PA for UK tax? (ie when my wife and I are both dead and one or other of our children continue to rent the UK house or if I give the house to one or other of them before I die)?
3. Reading RDR 1 I can't really see if I'm classed as UK domiciled or not. Can you help guide me please? (none of the flow charts or examples given in the guide seem to fit me) although it does say at 5.6 that you are normally regarded domiciled in the country where your permanent home is, so that would be Germany. Important point to avoid adding both sets of assets together and breaching the threshold.Kind regards.Paul.
Expert:  TonyTax replied 1 month ago.

1 I cannot refer across to another just answer section I'm afraid.

2 As your children are EU nationals and have British nationality in any event, they will qualify for the UK personal allowance.

3 Domicile is a difficult concept. You do have a UK pension which is taxed there and you have a UK rental property. However, given that your life seems to be based in Germany, you have a case for arguing that you are no longer UK domiciled. There are some more notes here.

TonyTax, Tax Consultant
Category: Tax
Satisfied Customers: 15901
Experience: Inc Tax, CGT, Corp Tax, IHT, VAT.
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