If my wife sends me a large sum of money to the UK from China I am liable to pay tax on this?
My wife has just recently sold an apartment in China she is Chinese and not a UK resident. She would like me to use the money from the sale of this apartment to purchase a property in The UK. I am a british although have spent the majority of the previous 5 years in China. Would I be liable to pay any tax on this money (around £300,000)? Thanks so much
As husband and wife you are free to hand any amount of money between you without immediate taxation concerns under the interspousal transfer exemption. Indeed even if you were not married, depending on the size of any gift, there is a seven year period, which once exceeded would mean that there is no tax on receipt of the 'gift' itself. Again where the transfer of capital is below the prevailing nil rate band for Inheritance tax - currently £325,000 - then there is no immediate tax consequence - and only the 'seven year rule' will apply. However where a capital transfer takes place above £325,000 AND the parties are not married or partners in a civil marriage (I forget the term sorry) then there is an immediate tax charge of 20% of the amount of any gift over £325,000 (the 'nil rate' band).
Of course there may have been taxes to pay on the sale proceeds in China. There may also be restrictions on the transfer of cash out of China.
There will most certainly be the need for one of you to be able to prove the source of such a large capital transfer being credited into a UK bank account. Anti-money laundering checks will need to be satisfied to prove both the source of the funds and the ID and UK address of the recipient.
In general terms a cash gift received does not attract any tax at all - other than possibly falling foul of the inheritance tax rules as set out above. Amounts below £325,000 will not trigger any immediate charge and as potentially exempt transfers (PETs) may escape any tax altogether on their gifting - unless and until the donor of the capital dies in the seven year period following the gift.
Note the seven year rule is NOT relevant to married couples transferring assets between each other under the interspousal transfer exemption. UK taxation will typically only come into play on any interest, dividends or rental yield the deposited/invested capital subsequently produces. Also when any investment is sold (in whole or in part) there may be capital gains tax to pay - if a profit has been made. However if you use the capital from China to buy a house in which you then live as your main residence then, when you sell your main residence – even for a healthy profit - such proceeds are exempt from Capital gains tax under a 'main residence' exemption.
In summary you should be able to receive this capital transfer into your UK spouses bank account tax free, if then used to buy a house in which you live there will be no income generated to be taxed and when you sell the house in which you have lived there will be no capital gains tax.
Of course the system is such that they will eventually catch up with all of us because if this capital enriches you such that by the time you die you are worth more than had you not had the capital uplift your estate will be more likely to be hit with 40% inheritance tax!!! Alternatively there will be tax to pay on any investment returns or interest the capital earns.
I must add a caveat to all the above. Taxation between different countries and tax jurisdictions can be complicated and I am most certainly no expert in this area. Therefore where there is any doubt I recommend that you consult a specialist tax adviser with particular knowledge of this type of transaction.
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