Election to be treated as UK-domiciled for IHT purposes
Newsletter issue - April 2022.
Inheritance tax is possibly the least popular of the main taxes. However, in most cases, no IHT is payable on transfers made to a spouse or civil partner - regardless of whether this takes place during the lifetime of the person making the gift, or via the will following death.
However, this exemption is restricted if the person receiving the gift is not UK-domiciled. There is good reason for this. Non-domiciled individuals are not subject to UK IHT on their worldwide estate, instead it only the value of UK-situs assets that are accountable. In the absence of specific rules, value transferred to a non-dom spouse or civil partner could escape the UK IHT net altogether if that person never becomes UK-domiciled or deemed domiciled.
In order to avoid this, the spouse exemption is restricted to £325,000 in such cases.
However, it is possible to access the unlimited intra-spouse exemption by making an irrevocable (if the individual remains UK resident) election to be treated as UK-domiciled for IHT purposes.
The election can be backdated for up to seven years and can be made at any time during the UK-domiciled spouse's lifetime. It must be made within two years of death, unless HMRC permits a late election.
The downside is that it immediately brings all of the non-domiciled spouse's non-UK situs assets within the charge to UK IHT. This may not be an issue if there are no significant assets, or if the individual is likely to become domiciled/deemed domiciled in the UK prior to their death anyway. The election does not affect the domicile status for income tax or CGT purposes, so the remittance basis can still be used.
Once made, the status continues to apply unless the individual becomes non-UK resident for four consecutive years.
For further information, refer to IHTM13040.
BLOG POSTS
Posted on Mon, 3 Aug 2015
Posted on Mon, 3 Aug 2015
Posted on Wed, 29 Jul 2015
TWITTER
Tweets by @OWSupportLATEST TAX TIPS AND NEWS
It has been revealed that companies across the UK have paid £95.2 billion in Business taxes in the financial year just finished (23/24) - a rise...
Baroness Ros Altmann, a leading campaigner on pensions, has highlighted her fears after figures showing that the number of pensioners liable for tax...
Business owners need to be aware of a batch of new laws that have just taken effect covering employees' rights....
The saga over whether HMRC will axe its tax helpline continues to rumble on, with the latest comments suggesting it may still close after all....
Q: I've started a new job quite recently with a hybrid working arrangement. I work from home 3 or 4 days per week,...
5th Companies House fees are increasing due to the recent introduction of the ECCTA....