Domicile is the important factor here when considering the scope of inheritance tax in the UK so we would need to establish the mother’s domicile first, then the source of the funds.
Just because the mother is non-resident does not mean that she is not UK domiciled. In addition, if the mother had previously been resident in the UK, it is possible that she may have acquired deemed domiciled status which has not yet ended as she has not yet been non-resident for long enough.
The concept of domicile is a general law issue and HMRC provide some basic guidance at RDRM22000.
Deemed domicile is governed by tax law specifically s267 IHTA 1984. See IHTM13000 starting at IHTM13060.
If the mother is UK domiciled or deemed domiciled, then the gift from the mother is a potentially exempt transfer within s3A IHTA 1984. Therefore, depending on the size of the gift and other transfers made by the mother, your client may have an IHT liability if the mother were not to survive the gift by seven years.
If your client’s mother is non domiciled and not deemed domiciled in the UK, we would only be looking at any potential inheritance tax issues if the cash gift came from a UK bank account/UK fund. If this is the case, then this would be a potentially exempt transfer as per s3A IHTA 1984. Once seven years has passed this would then fall out of the mother’s estate for UK IHT purposes.
If this was gifted from an overseas bank account, then this would be treated as excluded property for UK inheritance tax purposes as per s6 IHTA 1984. This means that this would be outside the scope of UK inheritance tax.
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