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Very tricky question!


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We live in France [natch]! Our son, his wife, baby daughter and her parents still live in UK. We are almost certain we can transfer a sum of money which attracts no tax [inheritance tax included] to help them buy a house. Came up with a brilliant idea this morning. If the other parents "donated" a sum to us, we held on to it for several months, then transferred it to our son and DIL, would this attract any form of tax, or would it be completely tax free? Does anyone know for certain? Bit of a minefield, but it would be super if it worked, and maybe stand someone else in good stead in future.

TIA for all knowledgable answers.

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Paul, 

that should be expanded to all European banks - at least.

 

Unless there is an accountant on the forum versed in UK and French tax laws I doubt if you will get definitive advice on a forum such as this.  I have to say it sounds far too easy and if that was the way to avoid taxes then half the world would be doing it, and the other half would be writing the legislation to stop it.

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I don't know what sum you're talking about but you can gift £3,000 a year to someone without tax problems, so with two parents that's £6,000 and of course if you add in a backdated cheque from April of last year that's another £6,000 ... so £12,000 altogether and all of it legal.
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[quote user="Evianers"]We live in France [natch]! Our son, his wife, baby daughter and her parents still live in UK. We are almost certain we can transfer a sum of money which attracts no tax [inheritance tax included] to help them buy a house. Came up with a brilliant idea this morning. If the other parents "donated" a sum to us, we held on to it for several months, then transferred it to our son and DIL, would this attract any form of tax, or would it be completely tax free? Does anyone know for certain? Bit of a minefield, but it would be super if it worked, and maybe stand someone else in good stead in future.

TIA for all knowledgable answers.

[/quote]

Errr ... I may be missing something here, but why not just have her parents give the money direct to their daughter? If they live for seven years after the transfer then it will be free of inheritance tax...

Regards

Pickles

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I'm with Pickles, providing parents are in reasonable health it should be ok as a potentially exempt transfer and of course the gift allowance too.

In the event of the parents death tax would only be applied on a sliding/reducing scale over seven years. If it is a very large amount a term assurance could be used to pay the tax.

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[quote user="Evianers"]We live in France [natch]! Our son, his wife, baby daughter and her parents still live in UK. We are almost certain we can transfer a sum of money which attracts no tax [inheritance tax included] to help them buy a house. Came up with a brilliant idea this morning. If the other parents "donated" a sum to us, we held on to it for several months, then transferred it to our son and DIL, would this attract any form of tax, or would it be completely tax free? Does anyone know for certain? Bit of a minefield, but it would be super if it worked, and maybe stand someone else in good stead in future.

TIA for all knowledgable answers.

[/quote]

Hi,

       If the other parents "donated" money to you it would ,in theory at least, be declarable by you , and subject to 60% gift tax. But as has been said there's no need to do that.

  You can transfer up to 156 974€ to your son (not his wife as you are not blood relatives), tax free .  In theory he should declare it as a "don manuel"on form  2735 (downloadable from www.impots.gouv. fr) to the Centre des impots des non-residents ,"CINR" ,TSA,10010 , 10 rue du Centre ,93465 Noisy-le Grand Cedex.  This declaration is only relevant if you might give him more large sums in future as the tax-free sum is re-newed every 6 years from the time of declaration.

       Another way to transfer quite large sums legally without having to declare is by means of "presents d'usage", whereby you can give gifts of money to all family members ,including non-blood relatives , on "special occasions" like birthdays , Xmas etc. The only precaution is to keep the sums below a level at which the tax people (if they ever find out) consider that you have "impoverished yourself".    Helpfully, the courts have established a rule of thumb , of 1.22 % of your total assets for each individual gift.

        So if your total wealth (including house) is ,say, 500 000€, and you give Xmas and birthday gifts to your son, his wife and the baby, you could give in one year a total of 500000x1.22%  =   6100  x 2  =12200 x 3 =36 000€.  If you include their wedding anniversary you could extend this to 48 000€.     You should do your own calculation based on your actual total wealth.

       If you google "presents d'usage", and "dons manuels" you will find confirmation of this.

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Hi,

    Thanks for your reply. I should have mentioned that ,if you decide on the presents d'usage route, you should associate the cheques with appropriate greetings cards or letters referring to the money gift  (of all of which you should keep copies-  just in case (very unlikely) you are ever questioned by the tax people).  This is unlikely because the only way such gifts normally are "picked -up" is when unexplained sums appear in the recipient's bank account - not relevant here,as your family's UK accounts are not open to french scrutiny, or, when (typical of french families) other children take legal action against what they see as disinheritance in favour of their sibling.

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