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bigduckontax, Accountant
Category: UK Tax
Satisfied Customers: 4188
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My father is a German resident and made several gifts of shares

Customer Question

My father is a German resident and made several gifts of shares and money to me, majority of which were 6 years ago.
He know has a brain tumour and wants to come to the UK to live with me. If he becomes a UK resident again will I be liable for IHT on these gifts made while he was a non UK citizen
Submitted: 2 years ago.
Category: UK Tax
Expert:  bigduckontax replied 2 years ago.
Hello, I am Keith, one of the experts on Just Answer, and happy to help you with your question.
The only problem with gifts as far as you are concerned is that they create for UK Inheritance Tax (IHT) purposes a Potentially Exempt Transfer (PET). PETs run off at a taper over 7 years and are the first to suffer IHT. In the event of a death within this period are added back to the deceased's estate and if the estate cannot meet the tax then it cascades down to the beneficiary for immediate payment. Now the taper has dropped for you to 20% so the worst case scenario should your Father not survive seven years from the gift any IHT would be substantially reduced. IHT does not kick in until the deceased's assets exceed 325K and is at 40% flat rate on the surplus. Inter spousal and charitable bequests inflate the 325K and if charitable bequests exceed 10% of the estate the rate falls to 36%.
Your Father may have had to pay gifts tax on these payments within the German Tax system, in which case the sums paid would be allowed as a tax credit against any UK IHT liability under the Double Taxation Convention between the UK and Germany.
I do hope that I have been able to set your mind at rest on this matter. Depending on the value of his possessions at death there may well be no IHT to pay anyway.