Using Unremitted Funds to pay for University fees

Background

We regularly come across non-UK domiciled clients who have claimed the remittance basis of taxation in previous years (either before 5 April 2008 when this basis of taxation was ‘free’ or after 5 April 2008 when a remittance basis charge was payable in some circumstances).

As a general rule offshore funds which have built up will be taxable when they are brought back to the UK.   However, there is a significant opportunity which is still available in certain circumstances.

Gifts to 18 Year old Children

Perhaps surprisingly unremitted funds can be gifted to children who are at least 18 years old for them to use in the UK without a tax charge arising.  For example gifts of offshore funds can be made to the children to help them meet university tuition fees.   New arrivers in the UK can access the remittance basis of taxation for free for their first 7 years in the UK.  It will therefore often be possible for them to accumulate income in a tax-free environment with a view to the funds being used by their children when they reach the age of 18.

Care needs to be taken with the mechanics of any such gift.   In particular if funds are brought into the UK before making a gift then this would constitute a remittance on which tax would be payable.

 

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