Gifted Deposit from Overseas

Gifting deposits when buying a home is common practice - in fact, 4 out of 5 first time buyers get help from their parents when buying their first home. The challenges arise when receiving a mortgage deposit gift from overseas, as the Anti-Money Laundering (AML) checks become even more rigorous.

Do solicitors check gifted deposits?

Yes, solicitors will always check if your house deposit is gifted. They will request the following 3 documents from you:

• Gifted Deposit Letter confirming the money is a gift and not a loan;
• Proof of ID and proof address, and
• Proof of funds

This criteria expands further when receiving money from overseas, and the checks conducted by solicitors will be far more extensive.

Can a gifted deposit come from abroad?

Money which originates from an EU or European Economic Area jurisdiction is regarded as coming from a trusted source because the funds, and the bank which holds them, will have been subject to a number of European Union directives which have to be adhered to subject to legal penalty. The European Economic Area includes the EU and Iceland, Lichtenstein, Norway and Switzerland (through various bilateral agreements).

The same cannot be assumed for money originating from non-EU sources. Because it is not subject to the same directives, it is likely to be regarded with more suspicion, which explains why solicitors require additional proof of the source of funds to satisfy their own Money Laundering Policies. There are certain high-risk jurisdictions (countries) from which solicitors will be unable to accept a mortgage deposit gift from overseas, either directly or indirectly.

How to declare gifted deposit from overseas

• Get ID Notarised from a local notary public in the country where the person sending the gifted deposit is resident.
• Get a letter from the person gifting confirming the money is a gift and not a loan.
• Get proof of funds, and the best advice is to provide as much evidence as possible as to where the money has come from.

It's important to instruct an experienced solicitor, as they'll guide you throughout this process. Getting this wrong can mean you won't pass the Anti-Money Laundering (AML) checks, and your funds will be rejected.

What are the rules for gifted deposits?

Whether you have overseas investments or parents who live in another country, in order for your solicitor to receive this, you’ll need to complete additional compliance checks to satisfy the solicitors’ Anti-Money Laundering procedures.

For any money that is received from overseas, you'll need to explain:

• 1Who is sending the money?
• 2Where did the money come from (source of funds)?
• 3Is the money a gift or a loan?

Gifted deposit from overseas - Who is sending the money?

With identity (ID) checks in the UK, the solicitors can use online tools to confirm the ID of a person based on a copy of their proof of address and proof of photo ID. For overseas clients, this is not an option, and the ID requirements are as follows:

• Proof of ID (photo ID): Passport, Driving Licence, National ID
• Proof of Address: Utility bill (last 3 months), Bank Statement (always useful to provide the same bank statement the money is coming from).

If the person sending the money does not live in England or Wales, then they will need to provide a notarized photocopy of their passport (certified to the original by a Notary Public). The Notary Public will verify the copies are true likeness of the originals and that the person is a true likeness to the photo ID. Then, the Notary Public will sign the copied documents and add their unique seal.

These ID documents should be sent to your solicitors in hard copy - they can be scanned and emailed, however, the originals will need to be received anyway before any money can be received by the solicitors.

Gifted deposit from overseas - Where did the money come from?

Where the money has come from is the most important question for any solicitors to understand and it is for you to prove. Whether it is an annuity, proceeds from a sale of a house or shares, divorce settlement or an insurance claim, all of these can be easily proved with supporting evidence.

To evidence where the gifted deposit has come from you should show:

• when the money was received into the overseas account – a copy of the bank statement/s showing the bank account name
• amount received and from whom.

You will need to also provide documents evidencing how these funds were accrued - Read How to prove source of funds

Gifted deposit from overseas - Is the money a gift or a loan?

If the gifted deposit from overseas is coming from a parent, then they will need to declare whether the money is a gift or a loan.

If the money is a gift, then your parents will need to write a letter confirming that it is a gift and they will have no interest in the property. You can follow the procedure here - Gifted Deposits.

If the money is a loan, then this needs to be declared to your mortgage lender (if applicable), and a loan agreement should be drafted.

Do you have to pay tax on a gifted deposit?

You won't pay any income tax on your gifted deposit from overseas. Depending where the giftors reside, you probably won't have to pay inheritance tax either*.