buying a flat in London -- tax implications?

[half_decent]

Apologies if this has been asked before. I did try searching, but my circumstances are a bit different to other cases I found.

I am a tri-national -- US, UK, and Canada. My wife for her part holds NZ and UK passports. No problem with visas and residency, then. My biggest headache is managing cross-border tax liabilities. Neither of us work, but we have considerable assets in various countries, mostly bonds, which generate the income we live on. I am currently a UK non-resident non-domicile and would like to keep it that way, even though I spend a few months of every year here. My wife is both ordinarily-resident and domiciled in the UK (I use these terms in their technical sense). As you may know, one of the factors all governments look at closely when determining tax-residency is whether or not you own property.

Well, to the point: given that the London property market is in free-fall, unemployment rising sharply, and the pound below 1.50, I am thinking of transferring some dollars from the US and buying a flat. I don't need a mortgage, I can pay cash -- I'm thinking of something in the region of GBP 600k. Because of the above considerations, I would like to put the property in my wife's name.

My question is what would be the tax implication of doing this, both for me and my wife? My experience has been that large quantities of cash flowing across borders always attracts the attention of Tax and Home-Office types...

Your advice would of course be appreciated.

[Bevdeforges]

OK, being a US citizen, you must report everything to the IRS, regardless of whatever other tax obligations you have for your other nationalities. All transfers over a certain amount (used to be $10,000, but I think that limit has been lowered since 9/11) have to be reported to the Treasury Dept. - but if you make a bank transfer, the bank is the one responsible for reporting it. (They may ask you to tell them the purpose of the transfer - but buying property in the UK is a perfectly legit response and should not cause you any problems.) Also, be sure you're filing your Treasury forms, declaring overseas bank accounts to the US Treasury Dept.

Depending on the source of your US cash, you may have to pay capital gains on any gains realized if you are selling investments to make the transfer.

Does your wife share your tri-nationalities status? If not, and she doesn't have US nationality, you should be filing as married, filing separately (and there can be real disadvantages to that). Depending on your financial arrangements, if you put the UK property in your wife's name, you may generate the need to file a gift tax return, though I'd run that by a US tax adviser. (Depends a bit on just how complicated your financial affairs are.)

Merely owning property in the UK shouldn't jeopardize your non-resident, non-domicile status unless you start spending 183 days or more there in a tax year or do something else that indicates that this is your "primary" residence (like have all your bills sent to that address, even those from overseas). If your wife is living in the property and you return there to "visit" her, even less than 183 days a year, you could be asking for reclassification, though. (It's not so much the fact of owning property as where your "family" lives and where you regularly return to.)

It would probably be worth consulting a UK tax adviser, too, while you're at it.
Cheers,
Bev

[kaz101]

Originally Posted by half_decent

As you may know, one of the factors all governments look at closely when determining tax-residency is whether or not you own property.

Yes but you can still own property and be non-resident and non-domicile. We moved from the UK in July 2007 and still have several properties there.

If the property is in your name and you are renting it out then you would apply for the non-resident landlords scheme (HM Revenue & Customs: The Non-resident Landlords Scheme).
However if it's all in your wife's name then that shouldn't apply since she's a resident.

Regards,
Karen

[half_decent]

Many thanks to both of you for your kind replies.

Best,
HD