My client is UK resident who has moved to the UK more than 10 years for studies and now intends to stay in the UK. My client's mother who is non UK resident and non domiciled has purchased a property in the UK for my client to live in when she first moved over. My client's mother is leaving the UK property to my client in her will but is now considering transfering the UK property to my client. What would be the tax implication on this?
Say the mother passed away, would there be any IHT payable on her UK asset, i.e. the UK property? The property is currently valued at c £700k.
If the property is now tranfered to the daughter's name at nil cost, would this be treated as a sale? Would the mother need to prepare a NRCGT return and would there be tax implication on the daughter.
Appreicate any help.
Thanks
Replies (13)
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This is interesting. The IHT issues for such disposals are in a sort of limbo right now. I would wait to see what is published in the summer Finance Bill before doing any gift. A NRCGT return would need to be filed by mother within 30 days (but NRCGT only arises on post April 2015 gains, so probably little if any NRCGT).
That's b0llocks Justin. The IHT provisions in this particular case are not at all in limbo right now; mum seems to own the property directly, rather than through a company or partnership.
Therefore, it is a UK situs asset, and thus not excluded property, whatever happens to the proposed legislation.
It is deemed transferred from mum to daughter at market value and an NRCGT return needs to be filed accordingly. I've yet to see a case where there has been a significant increase in value since April 2015 though.
For CGT purposes daughter also acquires it at market value.
For IHT purposes, it is a PET and the excess of value over mum's nil rate band will only become chargeable if she dies within 7 years of the transfer. Taper relief will be available if she survives at least 3 years.
Oh yes. You're right & I'm wrong! (The very first time that's happened I think, so well done!). I am bogged down with all these IHT excluded property limbo cases, like you I'm sure, hence the (harmless & obvious) mistake here (and it's unusual to see such properties held directly for obvious reasons). Mother may as well make the gift now.
I have a similar question (sorry for posting here) but you seem to know your stuff! I was following this question to see the answer.
My mother is an australian citizen. She moved to Oz about ten years ago to move her life out there. And after about 5/6 years she was granted citizenship. She has bought a property a while ago, her main residence, and wants to gift her share of it to me now.
Is it excluded from IHT (if she died within 7 years) due to her being in Oz and it's a foreign asset?
If mum's going to carry on living in it, the 7 years is irrelevant. It needs to be excluded property and she needs to be non-UK domiciled at the date of her death.
It is hard to say whether or not she is UK domiciled, and, if not (and she once was), when her UK domicile ceased based on the information given. You should take advice.
Non-doms are liable to UK IHT on any property that isn't excluded property (ie UK situs property).
The OP is about a property in the UK (the property in Oz was a side issue).
There is only potentially SDLT on the gift if there is a mortgage, but with careful drafting of the gift document that can be avoided (in my defence I answered the wrong question correctly above!).
The key thing missing in the question is local tax where the mother is resident and/or domiciled. This may be very different from the UK.