Your partner Mr.potter received an email from your client Ms.Mari on December 2 , 2019. The fallowing are the extracts of email from Mr.Mari As I approach my 75th birthday, I have decided to make some significant changes to my personal and financial affairs. (a) Rental income in the country of Falgar I have not been happy since I moved to Falgar. Consequently, I have decided to return to the UK on 1 May 2020. However, I will keep my house in Falgar, so that I can return to it at some future time. In the meantime, from 1 May 2020 I will rent it out. My understanding of the UK tax position in relation to this rental income is as follows: provided I do not bring the rental income into the UK, it will not be subject to UK income tax; if I do bring the income into the UK, I will then have to pay UK income tax upon it. Please explain whether or not my understanding is correct. (b) Gift of shares in Vyc Ltd Our family company, Vyc Ltd, has had another excellent year and its value continues to increase. On 1 July 2020, I will give my son, Edward, 10,000 ordinary shares in the company. Edward has spent most of the last few years travelling in Asia and I am hoping that this gift of shares will persuade him to return to the UK. I appreciate there may be a UK inheritance tax (IHT) liability if I die within seven years of this gift. Please explain the circumstances which would result in the maximum IHT liability on this gift and provide me with a calculation of the amount which would then be due. Also, please explain whether I am right to assume that capital gains tax gift relief will be available in respect of this gift. (c) Sale of industrial property in Manchester, England I am going to sell my industrial property in Manchester, which I have owned as an investment since 1 December 2015. I could sell it now, in which case I would realise a chargeable gain of 330,000. Alternatively, if I wait until I am back in the UK, I would be able to increase the selling price by 60,000. I plan to sell the property now, for the lower price, as I believe this will mean that no UK capital gains tax will be due. Please explain whether or not this is the best thing to do from a tax perspective The extracts from mail of your partner Mr.potter Mari Mari is 74 years old and married to Bill. The couple have two adult children: a son, Edward, and a daughter, Lily. Mari has always been domiciled in the country of Falgar. She was resident in the UK from 6 April 1996 until she and Bill moved to Falgar on 1 February 2017. On her return to the UK on 1 May 2020, Mari will resume UK residency. When carrying out this work, you should assume that Mari is a higher rate taxpayer. Taxation in Falgar Income tax is charged at 26% on all income arising in Falgar. There is no capital gains tax or inheritance tax. There is no double tax treaty between the UK and Falgar Vyc Ltd Vyc Ltd is an unquoted manufacturing company, which is registered in the UK. It does not own any assets other than those which are used in its trade. The shareholders in Vyc Ltd are set out below. The shareholdings have not changed for many years. Number of shares Mari 35,000 Bill (Maris husband) 19,000 Lily (Maris daughter) 10,000 Charlotte (Maris sister) 20,000 Louis (Charlottes husband) 16,000 100,000 You should use the following values for an ordinary share in Vyc Ltd when carrying out this work. Shareholding Value per share Up to 25% 10 26% to 50% 13 51% to 74% 19 More than 75% 22 On 1 October 2015, Mari made a cash gift to her daughter, Lily. This resulted in a transfer of value after deduction of exemptions of 280,000. This is the only gift Mari has made. When explaining the maximum inheritance tax (IHT) liability, you should focus on the date on which Maris future death may occur and the availability of business property relief. Calculate the maximum possible inheritance tax liability on assumption that both the conditions which are required to get inheritance tax liability are satisfied. Do answer as per UK tax law provisions Finance Act 2019