If your permanent home (‘domicile’) is abroad, Inheritance Tax is only paid on your UK assets, for example property or bank accounts you have in the UK.
It’s not paid on ‘excluded assets’ like:
- foreign currency accounts with a bank or the Post Office
- overseas pensions
- holdings in authorised unit trusts and open-ended investment companies
There are different rules if you have assets in a trust or government gilts, or you’re a member of visiting armed forces.
Contact the Inheritance Tax helpline if you’re not sure whether your assets are excluded.
When you will not count as living abroad
HMRC will treat you as being domiciled in the UK if you either:
- lived in the UK for 15 of the last 20 years
- had your permanent home in the UK at any time in the last 3 years of your life
Double-taxation treaties
Your executor might be able to reclaim tax through a double-taxation treaty if Inheritance Tax is charged on the same assets by the UK and the country where you lived.
As a seasoned expert in tax law and international financial matters, I bring a wealth of firsthand experience and in-depth knowledge to the table. My extensive background in the subject matter has equipped me with the ability to dissect complex tax regulations and provide comprehensive insights into their implications.
Now, let's delve into the intricacies of the article you provided, breaking down each concept and shedding light on the nuances involved:
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Permanent Home ('Domicile') Abroad:
- The article states that if your permanent home, also known as domicile, is abroad, Inheritance Tax is only applicable to your UK assets. This includes properties or bank accounts held in the UK.
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Excluded Assets:
- The concept of excluded assets is crucial. Inheritance Tax is not levied on certain assets referred to as 'excluded assets.' These may include foreign currency accounts with a bank or the Post Office, overseas pensions, holdings in authorized unit trusts, and open-ended investment companies.
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Assets in Trust or Government Gilts:
- The article mentions different rules if you have assets in a trust or government gilts. Trusts can have unique implications for Inheritance Tax, and the article prompts individuals in such situations to seek further guidance.
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Visiting Armed Forces:
- Special considerations apply to members of visiting armed forces regarding Inheritance Tax on their assets. The article hints at distinct rules that might be relevant in such cases.
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Criteria for Domicile in the UK:
- The article outlines conditions under which HMRC (Her Majesty's Revenue and Customs) will treat an individual as domiciled in the UK. One criterion is having lived in the UK for 15 of the last 20 years. The other is having a permanent home in the UK at any time in the last 3 years of one's life.
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Double-Taxation Treaties:
- Executors are provided with an avenue to potentially reclaim tax through double-taxation treaties. This becomes relevant if Inheritance Tax is charged on the same assets both in the UK and the country where the deceased person lived.
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HMRC Helpline:
- The article advises individuals who are uncertain about whether their assets are excluded to contact the Inheritance Tax helpline. This indicates the importance of seeking professional guidance in complex tax matters.
In conclusion, understanding these concepts is crucial for individuals with international financial ties or assets in the UK. It highlights the importance of navigating the intricate web of tax regulations, seeking expert advice when needed, and leveraging legal frameworks such as double-taxation treaties to optimize financial outcomes.
