Parents residing abroad and IHT

georgan

Hi all,

I am permanently residing and working in the UK for the last 10 years. My parents are permanent residents of Greece (never entered the UK). They have given me a certain amount to investment on their behalf in a Joint Venture with a property developer. There will be a contract/power of attorney that authorises me to do that on their behalf. I will also fill tax returns for them declaring all profit made out of this joint venture in order to give HMRC its right share.

The question I have involves the unfortunate case of one of my parents dying. Will they in any case be liable for IHT in the UK?

CASE 1: if this happens whilst the joint venture is still running
CASE 2: if this happens after the joint venture is dissolved.

Thanks for any input on this.

Aris

Cook_County

UK IHT is charged on the worldwide estate of UK domiciliaries and UK situs assets of non-UK domiciliaries (such as real property).

You are presumably non-UK domiciled along with your parents (I recognise that you are of course UK resident). Consequently on death your UK situs assets would be charged to UK IHT - while your non-UK assets would not.

Your parents similarly would pay UK IHT on UK situs assets. The method of avoiding this in history involved ownership through non-UK trusts (typically in Guernsey). Following the changes in UK taxation of trusts announced in last week's Budget you should take advice from your solicitor as to how best to mitigate the impact of UK IHT. This may involve offshore mortgages or foreign corporate ownership if trusts are no longer suitable.

Do not overlook however taxes on death in Greece. A structure that minimises one set of taxes without considering the other country would be of little value.

georgan

Hi CC and all,

very useful feedback! Two clarifications I would appreciate follow:

1. What is that determines "being domicile" in technical terms? I am a Greek National by birth but live and work in the UK for the past 10 years, having obtained British citizenship (alongside the Greek one) over this time. Does this make me a British domicile? My parents are clearly Greek domiciles (hence that's clear w.r.t them).

2. Is there a certain document/leaflet (ref#) I could obtain from HMRC that explains IHT issues regarding assets or profits gained in the UK from people living abroad, and vice versa (assets and profits made outside the UK from UK citizens).

Thanks for any comments

Aris

Cook_County

Aris:

1. HMRCs view on the law on domicile can be found at the following link:http://www.hmrc.gov.uk/pdfs/ir20.pdf. Please be aware that the booklet only contains an opinion, not all tax advisers agree with HMRC on every point.

2. On a similar topic, HMRCs view on foreign aspects of IHT can be found here: http://www.hmrc.gov.uk/leaflets/iht18.pdf

Please note that it is impossible to have British domicile. You may be domiciled in England & Wales, Scotland or Northern Ireland; but never in all four nations at once. It would be unusual in your circumstances for you to have aquired domicile within the UK at this point. Professional advice is almost certainly required.