My wife and I are UK residents and jointly own a small apartment in Switzerland, which we would like to gift to our children. Under Swiss rules this is tax-free as long as we give it to family. If we decide to go ahead then what is the position regarding HM Revenue & Customs? Will it attract capital gains tax and or inheritance tax?
Berry Bloomberg, a partner in the Geneva office of law firm Withersworldwide, says that as you are UK resident, this gift may well give rise to a capital gains (CGT) charge. It also has the potential to be subject to inheritance tax (IHT).
Under the current rules, if you are neither domiciled nor deemed domiciled in the UK, the gift will be outside the scope of IHT and you can avoid a CGT liability by claiming the “remittance basis”.
Following the Budget announcements on March 6, from April 6 2025 the remittance basis will no longer be available, but you will be exempt from CGT if you have been UK resident for fewer than four tax years. IHT will apply to worldwide gifts once you have been UK resident for 10 years. There may be further changes if Labour wins the next general election.
Subject to that, you will each be liable for CGT on your share of the gain on the property, at a rate of 18 per cent at the basic rate or 24 per cent at the higher rate. The taxable gain will be equivalent to the market value of the property when you make the gift, less its value when you acquired it and any allowable deductions.
If you have claimed the remittance basis and are not domiciled or deemed domiciled by April 6 2025, you may have the option of “rebasing” the property to its value on April 5 2019, meaning you will only pay CGT on any gain after that date.
Principal private residence relief can exempt some or all of the gain realised on the disposal of a house. However, the property needs to have been your “main residence” at some point. Furthermore, from April 6 2025 you need either to have been resident in the country in which the property is located or have spent at least 90 nights at the property in a year.
Turning to IHT, if you are subject to this, the gift of the property to your children will be free from IHT if you live for seven years from the date of the gift. You could take out a life insurance policy to cover the risk of an IHT charge if you die within seven years.
Crucially, even after seven years have passed, the value of the property will be clawed back into your taxable estate if you are treated as having “reserved a benefit”, for example because you continue to use the property, or derive some other benefit from it. There are various ways to avoid this, for example by retaining a share or paying market rent.
Lastly, it’s important to understand how Switzerland will tax you on the gift. While Switzerland doesn’t impose inheritance or capital gains tax at a federal level, individual cantons have different rules, with some imposing tax on gifts to descendants. If you were to find yourself subject to tax in both the UK and Switzerland, you would need to rely on the double tax treaty to avoid paying tax twice.
Should we share a divorce lawyer?
My husband and I have decided to divorce after 32 years of marriage; we have two grown-up children. My husband is trying to save money and insists that we use one lawyer, but I am not sure whether to agree. Everyone I know has had their own solicitor to advise them personally through the process. I am less financially literate than my husband and I want to make sure my interests are looked after appropriately.
Ffion Greenfield, senior associate at Burgess Mee Family Law, says sharing one lawyer to advise you about your divorce and how to divide your finances upon your separation is a relatively new way of dealing with divorce, but it does offer benefits.
If you are able to work together, using a single lawyer could reduce the costs for you and your husband, as well as being quicker than the traditional divorce route — where people have a lawyer each.
One benefit of sharing a lawyer is that it encourages collaborative discussions between you and your husband so you each feel well informed and in control of the decisions you ultimately make about your finances. It should also help to minimise any acrimony between you, ideally relieving the potential emotional burden on you and your children, which may be crucial to your whole family’s emotional wellbeing throughout the divorce process and in the future.
However, if you do instruct a lawyer together, they must act on an impartial and transparent basis. They will advise you and your husband together about your options using the reference point of what the court would consider a fair outcome for both of you, so that both of your needs are met by the eventual settlement.
The lawyer you choose can assist you with the financial disclosure process and will take time to ensure you each feel fully informed about your financial position. This will be particularly important in your case where you believe you have less insight into how your family finances were managed during the marriage.
If discussions reach an impasse, you and your husband may be referred to mediation to try to work through the roadblock, hopefully enabling agreement. Alternatively, if there is a discrete point preventing agreement via the single lawyer, you may be referred to an arbitrator who can give a binding decision on that point.
If you reach an agreement via your lawyer, they can then convert that into a court order which, once approved by the court, will give you a final, binding and enforceable settlement.
Our next question
I promised to leave a property to my daughter but now I’ve changed my mind. Do I have to go through with it?
However, if your case is particularly complicated — for example, if you are worried about your husband hiding assets or not being honest about the finances, if there is a significant power imbalance, or if there has been domestic abuse in your relationship — using the same lawyer is unlikely to be the right option for you.
For you and your husband to get the most out of sharing a lawyer, you must both be committed to working together amicably and transparently to reach a fair resolution.
The opinions in this column are intended for general information purposes only and should not be used as a substitute for professional advice. The Financial Times Ltd and the authors are not responsible for any direct or indirect result arising from any reliance placed on replies, including any loss, and exclude liability to the full extent.
Do you have a financial dilemma that you’d like FT Money’s team of professional experts to look into? Email your problem in confidence to money@ft.com.
