Gifting investment property to relative in Hong Kong

Gifting investment property to relative in Hong...

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Hello

My client has recently acquired an investment property and wishes to live off the rental income.

He however wishes to gift the property to his nephew who lives in Hong Kong (in what appears to be an attempt to avoid IHT). He has been in Hong Kong for a long time so will no doubt be resident there and no longer resident in the UK. He has just acquired the property and will gift it very soon so I am not looking in to CGT at the moment.

My concern is the set up of the rental income.

Will his nephew have to pay UK tax on the rental income even if he is not resident of the UK? Is he considered a non resident landlord?

My client wants to live off the rental income, so he will not be physically passing over the rental income to his nephew, but will no doubt have to compensate him for any tax suffered. 

I am guessing that as long as the income is taxed in the UK under nephew or client, that the set up would be agreeable to HMRC?

Is there any easier way of structuring this transaction, eg something in writing so that the client receives the income and pays the tax on a property that no longer belongs to him?

Thank you

Leigh

Replies (3)

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By johngroganjga
11th May 2015 16:58

But surely what you are describing is a gift with reservation. If the reason for doing it is to save IHT then it is pointless is it not, because it does no such thing.

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By LeighM
11th May 2015 17:28

Thanks John

The client is not living in the property and never will. Would the fact that the client received rental income make it a gift with reservation?

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By Justin Bryant
11th May 2015 19:17

No

If your client instructs a good tax lawyer, this can easily be done without causing a GWR.

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