Undeclared gift from abroad - Self Assessment advice

[knowellfinancials]

Hi

I had recently posted a thread requesting advice as a start up and received tremendous guidance from this forum...am working on most of them now and I hope to be up and running in a month's time.... Meantime, I was requested by someone (say X) for help with their self-assessment for 2008-09.

X received a large sum of money from abroad in Dec 08. It was a gift from her mother and was a direct bank transfer from abroad to X's personal account in UK. X earned interest on this money until Sep 09 and tax was deducted on this interest income. In Sep 09, X used this money to buy a house, took a mortgage along with her son and moved to this house in Oct 09. She then let out her old house and started earning rental income sometime in 2010. X called HMRC and informed that she now receives rental income. X has now been advised to file her self-assessment for 2008-09 and she is now in receipt of the self-assessment paper form from HMRC which she needs to file pretty soon.

X is a FTE and has never had any other source of income. She now wonders how to go about filing her self assessment for 2008-09, how should she treat the gift that she received from her mother? Will the interest she earned alone qualify as income or will the money she received from her mother also be taxed?

Can someone advise if she can deal with this and file her self-assessment herself online or if this is far complex her to handle please?

[elainec100@cheapaccounting]

Can someone advise if she can deal with this and file her self-assessment herself online or if this is far complex her to handle please?

I have a simple approach to this - if you need to ask then you are unlikely to get it right and may need help :)

[knowellfinancials]

Elaine

A local accountant here said that gifts are tax free and all she needs to do is to declare her interest income along with the salary income, recompute tax and if the tax deducted matches, she files the return. If there is a difference, she just needs to pay the difference.

I was not sure :| if it would be as simple as that and hence posted this...

If it is really that simple, I think I will advise her to take that route.... If it is complex, I wanted to know what is the complexity involved and if someone here can offer to do this for her.... Would be great if that someone is in West London & can advise upfront what their fee is going to be.... Would appreciate PMs also

[Zeno]

Do you see what we were driving at on your other thread now?

Your idea for subcontracting tax advice has fallen flat on it's arse at the first hurdle because you don't know enough to be able to judge the accuracy of the advice given (not that I am enjoying saying I told you so...).

Please stick with what you know. You will have a far better business providing quality advice in areas you have the professional competency & experience to deal with.

[knowellfinancials]

Zeno

As rightly pointed out by you in my earlier thread and the post above, I am sticking to what I know when it comes to providing services myself. Where I cannot provide it myself, I am trying to help.

If you have had a chance to look at my website now... you would know that I have indeed valued your advice on my other thread. The 2 advisers whom I have taken very seriously from my earlier thread are yourself and DFL ....... I still come back to this forum for tax advice for 2 reasons

1. Every time I do not have an answer for a question in my field or a related field, I look at it as an opportunity to learn. I believe there is a learning process for all of us all the time.

2. I am still starting up and I look at every interaction as an opportunity to spread word about my business - whether or not the person at the other side ends up as my client. As I mentioned in my thread, I have already told X that I am not a tax expert, but I may be able to look for advice for her and guide her to the right person (which for all practical purposes, may not be 'ME').

[RAL]

What is her mother (the donor) 's resident and domicile status? If you do not wish to post in open forum, you can pm, I will see if I can help you or guide you into the right direction.

[Zeno]

Every time I do not have an answer for a question in my field or a related field, I look at it as an opportunity to learn. I believe there is a learning process for all of us all the time.

That is certainly true and perpertual learning is required by every accountant no matter what their specialism but there does come a point where you have to decide what is relevant to you.

In areas where I am outwith my expertise, lets say non-residence, I am happy enough to know enough about it to know when I don't know enough about it in order to refer it on to someone who does (if you follow that). There would be little point in me trying to learn it in detail as I would rarely use it in practice and as such could not maintain the required degree of competancy.

What you have to bear in mind about referrals is how it reflects on you. Most practices regard reliable book keepers as somewhat of a holy grail but the same is true of tax & VAT specialists.

As I also mentioned, in the situation with your current client, if you pass this on even if only for tax work, it is quite unlikely you will retain the client. Quite a difficult balancing act.

[knowellfinancials]

Based on the advice (from those in this forum and outside as well), given below is the suggested solution


Gift received by X is not taxable and does not require declaration
X should declare the interest earned and the interest would be taxable
X can file her self assessment by combining her employment income and interest income, recomputing the tax and depositing the difference in tax, if any
X should obtain a letter from her mother stating that she has gifted this money. X should keep all other related documents i.e proof of interest having been deducted on her interest etc. These will be necessary should HMRC come back with any further queries
Some key points that have led to the above suggestion


X's mother is a resident abroad. X's mother is domiciled abroad
The transaction was a straightforward bank transfer from X's mother's personal bank account abroad to X's personal bank account in UK
X is a permanent resident in UK
I have posted this for the benefit of those who may drop in to this thread for advice in similar circumstances and to ensure that any perceived danger or mistake in the suggested solution can be flagged off by tax consultants visiting this thread.

Any visitors - please do not consider this as a solution for you however similar your situation is as tax solutions can vary significantly depending on even a slightest change in the individual circumstances, the timing when the advice is sought, past history etc.