Inheritance Tax question
Discussion
Hi
I think this is an accountancy question, I'm hoping for some guidance from someone with experience in this area.
My Dad died a few months ago and I'm going to be dealing with his estate as executor. He had a relatively small estate in the UK (approx £30k), and for the last 10 years had been a resident in Spain (declared legally as a resident in 2006) and owned a villa over there.
He had an English and Spanish will, and the Spanish will makes it clear that it is to deal with his Spanish estate only and that his UK will covers the rest of his estate.
The probate guidance for the UK seems to suggest I have to declare his Spanish property as part of his UK estate, but this seems unreasonable to me, he had a Spanish will and his Spanish estate will be dealt with under Spanish law with inheritance tax payable on this in Spain.
Do I also need to declare this in the UK and face the possibility of paying inheritance tax twice on the same assets? I'm tempted to ignore the Spanish estate when applying for Probate here but obviously I don't want to do anything illegal!
Thanks
I think this is an accountancy question, I'm hoping for some guidance from someone with experience in this area.
My Dad died a few months ago and I'm going to be dealing with his estate as executor. He had a relatively small estate in the UK (approx £30k), and for the last 10 years had been a resident in Spain (declared legally as a resident in 2006) and owned a villa over there.
He had an English and Spanish will, and the Spanish will makes it clear that it is to deal with his Spanish estate only and that his UK will covers the rest of his estate.
The probate guidance for the UK seems to suggest I have to declare his Spanish property as part of his UK estate, but this seems unreasonable to me, he had a Spanish will and his Spanish estate will be dealt with under Spanish law with inheritance tax payable on this in Spain.
Do I also need to declare this in the UK and face the possibility of paying inheritance tax twice on the same assets? I'm tempted to ignore the Spanish estate when applying for Probate here but obviously I don't want to do anything illegal!
Thanks
I don't know but when I had to sort out an estate for the first time last year I found my local probate office astonishingly helpful. So maybe ask them first - they may have a leaflet that covers it.
I can't think that you would have to pay tax twice on the same assets - and £30K is miles below the IHT threshold of £325K so no tax would be payable on that part anyway.
I can't think that you would have to pay tax twice on the same assets - and £30K is miles below the IHT threshold of £325K so no tax would be payable on that part anyway.
Firstly condolences.
Re the question, I'd have to check the details as it's a while since i did IHT, but broadly you are only subject to IHT if you are domiciled in the UK or assets are situated in the UK. So if your father was domiciled in Spain (intention to make that his place of residence etc), then no IHT is payable on the Spanish property.
If he remained domiciled in the UK, then the property will be subject to IHT, but I imagine he will get double tax relief for any Spanish tax paid under the UK:Spain double tax treaty. Therefore only paying one lot of tax.
Re the question, I'd have to check the details as it's a while since i did IHT, but broadly you are only subject to IHT if you are domiciled in the UK or assets are situated in the UK. So if your father was domiciled in Spain (intention to make that his place of residence etc), then no IHT is payable on the Spanish property.
If he remained domiciled in the UK, then the property will be subject to IHT, but I imagine he will get double tax relief for any Spanish tax paid under the UK:Spain double tax treaty. Therefore only paying one lot of tax.
Edited by Alpinestars on Sunday 22 September 21:10
Thanks for the replies.
Dad was domiciled in Spain, he legally declared it as his place of residence in 2006, and it was his intention to live out the rest of his days there. Unfortunately he died unexpectedly on a trip back to the UK. At least he got 10 good years living his dream in the sun.
I'm fairly certain even taking into account the Spanish estate the total value is under the IHT limit, I think I was more concerned about why I'd have to declare it, and possible go to the trouble of getting valuations when it seemed to me it falls outside his UK estate.
I will give the probate office a call this week, I'm heading over to check on the villa soon so could always arrange valuations while I'm there.
Dad was domiciled in Spain, he legally declared it as his place of residence in 2006, and it was his intention to live out the rest of his days there. Unfortunately he died unexpectedly on a trip back to the UK. At least he got 10 good years living his dream in the sun.
I'm fairly certain even taking into account the Spanish estate the total value is under the IHT limit, I think I was more concerned about why I'd have to declare it, and possible go to the trouble of getting valuations when it seemed to me it falls outside his UK estate.
I will give the probate office a call this week, I'm heading over to check on the villa soon so could always arrange valuations while I'm there.
Are you sure you understand the concept of "domicile"? It's not as simple as you think. And it is most definitely NOT the same as "place of residence".
Just because a person lives abroad does NOT mean that they automatically lose the domicile of the country in which they were born.
It sounds to me that your grandfather was RESIDENT in Spain but DOMICILE in the UK. I would suggest that you speak to a UK IHT expert (which I am most definitely not) to find out EXACTLY what the situation is.
Just because a person lives abroad does NOT mean that they automatically lose the domicile of the country in which they were born.
It sounds to me that your grandfather was RESIDENT in Spain but DOMICILE in the UK. I would suggest that you speak to a UK IHT expert (which I am most definitely not) to find out EXACTLY what the situation is.
From the HMRC website
What do you mean by deemed domicile?
For inheritance tax purposes, there is a concept of 'deemed domicile'. This means even if you are not domiciled in the UK under general law we will treat you as domiciled in the UK at the time of a transfer if
• you were domiciled in the UK within the three years immediately before the transfer, or
• you were resident in the UK in at least 17 of the 20 income tax years of assessment ending with the year in which you make a transfer.
http://www.hmrc.gov.uk/cto/customerguide/page20.ht...
What do you mean by deemed domicile?
For inheritance tax purposes, there is a concept of 'deemed domicile'. This means even if you are not domiciled in the UK under general law we will treat you as domiciled in the UK at the time of a transfer if
• you were domiciled in the UK within the three years immediately before the transfer, or
• you were resident in the UK in at least 17 of the 20 income tax years of assessment ending with the year in which you make a transfer.
http://www.hmrc.gov.uk/cto/customerguide/page20.ht...
Eric Mc said:
Are you sure you understand the concept of "domicile"? It's not as simple as you think. And it is most definitely NOT the same as "place of residence".
Just because a person lives abroad does NOT mean that they automatically lose the domicile of the country in which they were born.
It sounds to me that your grandfather was RESIDENT in Spain but DOMICILE in the UK. I would suggest that you speak to a UK IHT expert (which I am most definitely not) to find out EXACTLY what the situation is.
Eric is spot on, the residence issue is only a VERY small part of the equation.Just because a person lives abroad does NOT mean that they automatically lose the domicile of the country in which they were born.
It sounds to me that your grandfather was RESIDENT in Spain but DOMICILE in the UK. I would suggest that you speak to a UK IHT expert (which I am most definitely not) to find out EXACTLY what the situation is.
Given the information provided, £30k in UK assets, died whilst visiting the UK and born in the UK I'd bet good money HMRC will view your Father as UK domiciled.
sounds like he is Uk dom (or the revenue will see it that way) so IHT is due on his WORLDWIDE assets.....allowing for double taxation deals with spain.
IHT limit is £325k (plus any unused from a spouse if he had one?) so may be under that - but HMRC will still need values to make sure.
IHT limit is £325k (plus any unused from a spouse if he had one?) so may be under that - but HMRC will still need values to make sure.
Simpo Two said:
As a matter of interest, what IHT policies do other EU countries have? Is it all cosy like VAT or do they all fight over it?
Most other European countries have some sort of tax based on a person's estate at death. In Ireland it is called Succession Tax.In the UK, it used to be called Death Duties before reformed into Inheritance Tax in the 1970s/80s
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