Inheritance Tax Advice

My parents are planning to sell land abroad. When they sell their land they will have to pay appropriate taxes abroad, along with a fee to the central bank as well. However they plan to transfer the money back to the UK. Once the money is in UK do they have to pay HMRC inheritance tax on this money? Even though they’ve paid taxes in the foreign country and paid their central bank too.

If the money brought to UK was to be transferred to their kids and grandchildren as a gift, do they still need to pay inheritance tax on this? Would be great if someone could shed some light on this

You’re not really giving enough details to comment , and you would be better off seeking professional financial advice rather than counting on somebody commenting on a public forum as verbatim on personal tax affairs

You possibly have to consider off the top of my head , where the land is with regard to double taxation conventions / treaties , domicile of your parents , joint ownership or part ownership of the land, is it “their land” (some form of Capital Gains Tax )or did they inherit it (in which case Inheritance tax should have already been paid ? by the deceased estate ) … if they transfer it to their kids , grandchildren how are they going to transfer it - a trust or a cash gift , how old are the parents , are they likely to die in less than 7 years, are the parents returning to UK or have been domiciled here already, are they likely to need social care in the next couple of years, in which case the local authority could recoup some of the transfer to pay for those costs if they are seen to be avoiding them by the transfer , etc etc

Sorry to be so negative, but it is potentially an expensive minefield if you don’t get the proper professional advice

PS Im going for the record number of edits ( set at 10 I think :slight_smile: )

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@Achchu how are they planning on repatriate the funds to the UK? My advise would be NOT to use the banks as the FX rate and foreign exchange fees will likely be a fortune!

Can give you some recommendations of international payments companies if you like?

To give you guys more context. I also spoke to HMRC this morning regarding this.

The amount my parents would like to send back to England would be around £50,000. However foreign banks only recognise USD. So this would be around 70,000 USD. @robigyorky I understand that there will be a lot lost on the way here, however would there be any international payments companies that would be able to send money from Sri Lanka to UK for example? I looked at transfer wise and so on. But they do not offer the option to send from Sri Lankan rupees to GBP for example

HMRC response - They indicated that my parents would indeed need to pay capital gains tax when they do bring the money over however if they kept hold of the documents and receipts then that amount will be taken into consideration and the capital gains tax of 10% will be applied on the net after deductions. It’s still a considerable amount however unfortunately

@iansilversides oh no not at all! The honesty really does help. I now understand how complicated it all is :slight_smile: I hope the extra information provided gives you some clarity regarding my situation

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@Achchu try https://www.worldfirst.com/uk/private/. If you call them I’m sure they’d be able to advise whether or not they support the currency pair you need.

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I would consider consulting an tax advisor with experience of foreign assets.

the nett gain after deductions could in fact be zero as its already been deducted in SL and wouldn’t be taxed twice ???

but a quick internet search -

Sri Lanka is covered by double taxation treaty - :heavy_check_mark:

CGT tax in Sri Lanka and UK appears to be the same at 10% with a definition of what is exempt in Sri Lanka below which might help your parents if the land was gifted ? - so to me if you have paid the Sri Lankan CGT which is the same as UK CGT then the CGT amount has been paid - looking at it simplistically :slight_smile:
The UK HMRC has no duty to define the rules in your favour, only tell you the rules ie there is a 10% rate to pay less deductions , your tax advisor could possibly justify more exemptions and allowances claimed

  • you may even be able to claim a rebate because of your parents CGT UK allowance if they are domicile in UK ???

WHAT ARE THE EXEMPTIONS FROM CGT? - Sri Lanka -

  • The principle place of residence of an individual, provided that it has been owned by the individual continuously for the last 3 years before disposal and lived in at least 2 years of those 3 years (calculated on a daily basis).
  • If the profit/gain is less than 50,000 rupees ($280) and if the total profits gained within the year (through multiple gains) is less than 600,000
  • Investment asset realised in two or more parts
  • Realisation of investment asset that is jointly owned
  • A property or land gifted to blood relations
  • Trading stock or depreciable asset

as I say the more you look into the details the more detail you need

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