Advice Needed on Gift Tax - Money from US to UK

If my parents (who live in the US) were to gift money to my husband and me (in the UK) would it be subject to UK tax as well as US Gift Tax?

Is there a good web reference for this type of thing?  Has anyone else had experience with this situation and/or transferring large amounts of money from the US to the UK?

We are hoping to use the money for a downpayment on a house, but until the time is right for us to move in to our own home, we would keep it in a savings account.

Any help would be greatly appreciated!

If my parents (who live in the US) were to gift money to my husband and me (in the UK) would it be subject to UK tax as well as US Gift Tax?

In the UK there is no tax when gifts are received, only potentially when gifts are made, but your parents will of course not be subject to UK Inheritance Tax (unless they originated from the UK and still have UK domicile).

In short, there is no UK tax angle to this. We simply do not have any sort of Gifts Received Tax.

Of course, once you receive the money, any interest earned on it will be subject to income tax in the usual way.

It is a little more complicated than John thinks.

You are a US citizen, resident but not domiciled in the UK.  Your husband is a US citizen.

Your parents would presumably use up some of their lifetime gift tax exclusion, that of course is an issue for them; not you.

However you would be subject to US tax on gains on sellling the new home & foreign currency gains on repaying a Sterling mortgage.  For this reason it is usually advised that the non-American spouse owns all or most foreign (ie UK) real estate.

Because your husband is not a US citizen you can only leave him $60,000 before US estate taxes kick in on your death while because you are not UK domiciled he can only leave you £55,000 plus the UK nil rate band.

For these reasons it is sensible to structure the purchase in the way that will produce the best result in the long-term. Your parents gift is a part of that planning. 

You are a US citizen, resident but not domiciled in the UK.  Your husband is a US citizen.

Just to clarify, I am a US citizen - my husband is a UK citizen.  Although I think that is what you meant.

However you would be subject to US tax on gains on sellling the new home & foreign currency gains on repaying a Sterling mortgage.  For this reason it is usually advised that the non-American spouse owns all or most foreign (ie UK) real estate.

Apologies, but I do not understand. Are you saying that ANY real estate that my husband and I purchase together and then subsequently sell (that may result in a gain) will be subject to tax in both the UK & US? Could you point me in the direction of any good resources to read up on this before we start househunting?  I'd really like be prepared for this.

I was just doing some research about the terminology of 'resident' vs 'domicile' and found this bit of information:

In general, anyone who is resident in Britain but not domiciled here only pays income tax and capital-gains tax on income and gains generated overseas if they remit the income and gains back to Britain. However, under new legislation this changes after seven years of residence. Then a "non dom" can choose either to pay taxes in the same way as those domiciled in the UK, or to pay an annual fee of £30,000 to the British government to avoid doing so.

Will that change what you've explained above?

For these reasons it is sensible to structure the purchase in the way that will produce the best result in the long-term. Your parents gift is a part of that planning. 

Sorry for all the questions, but this is our first venture into housebuying and will start us on the path for our future.  I don't want to mess it up!

This is complex - apologies for my previous typo.

The UK does not tax gains on sales of main residences (or currency gains in Sterling compared to dollars); the US does.

The change in the remittance basis of taxation in the 2008 Finance Act has no effect on your actual domicile and only minor effect on your US tax position.

I understand now. We hope to purchase a house within the year if all goes well and this will help tremendously with our planning.  Thank you very much for your replies.

This area is complex and you should speak with a cross-border tax advisor.  I have not thoroughly review everything said above, but most of Guya's comments appear accurate.  One item that Guya mentions is

Because your husband is not a US citizen you can only leave him $60,000 before US estate taxes kick in on your death . . .

  This statement is inaccurate.  As a U.S. citizen, you can claim the unified credit regardless of who you leave the property to.  The unified credit for 2009 is $3.5 million.  Therefore, if you were to die in 2009, you could leave up to $3.5 million to your husband without any U.S. estate tax being imposed.  The $60,000 number mentioned by Guya is applicable to non-U.S. residents that are not U.S. citizens and that have property located in the U.S.  Since you are a U.S. citizen, this rule does not apply to you.

Here is a nice flowchart:

http://www.aeib.com/downloads/id50_Estate-Planning-Flowchart-for-Non-US-Citizens.pdf

You'll note that the unlimited marital deduction is not available if the surviving spouse is not a US citizen, unless one creates a QDOT.  I think that is what I said before, but perhaps in different words?

Unfortunately these days there can be UK tax at the 20% rate on settlement into a QDOT for UK domiciliaries or deemed domiciliaries...this is a fairly new problem created by Schedule 20 Finance Act 2006 and not one I have seen lawyers address as yet in practice (there is some limited discussion here: http://www.taxationweb.co.uk/tax-articles/capital-taxes/trusts-aligning-the-iht-treatment-applications.html )

Thanks for the link to the chart.  It is interesting.

You'll note that the unlimited marital deduction is not available if the surviving spouse is not a US citizen, unless one creates a QDOT.  I think that is what I said before, but perhaps in different words?

I don't believe that is what you said.  If I am correct, you said

Because your husband is not a US citizen you can only leave him $60,000 before US estate taxes kick in on your death . . .

There is no need to rely on the marital deduction if the estate of a U.S. citizen does not exceed the unified credit ($3.5 million for 2009).  A U.S. citizen can leave up to the amount of the unified credit to anyone, including nonresident aliens (spouses or otherwise) without U.S. federal estate taxes being imposed.  The number is much higher than $60,000 and has nothing to do with the marital deduction.