International Inheritance Tax ?

spindler_2

Hi,

My Father's aunt has died in Florida (she lived there for 30 years, but is a UK citizen), and has left her estate to a number of relatives (including me) in the UK.

I realise that the US has no concept of inheritance tax.

Will the money that eventually arrives be liable for UK inheritance tax ?

Or will it be classed as CGT or income ? (Or both)

Thanks for your advice
Spindler

dzug1

There will be no UK tax to pay on this - other than after it's invested and producing income and/or capital gains.

The US DOES (in effect) have inheritance tax, though, though it doesn't work the same way as here. It's called (I think) Gift Tax and AIUI (not that well) there is a lifetime allowance. If the lady has exceeded this then there may be tax to pay - but before you receive the money.

antrobus

Liability to UK inheritance tax depends on where you're domiciled. The fact that your father's aunt had been resident in Florida for 30 years doesn't neccessarily mean that she wasn't domiciled in the UK, and therefore her estate might still be liable for UK inheritance tax. That however, is an issue for the executors of her estate. What do they say?

spindler_2

The US based exectutor hasn't mentioned anything about liability for UK tax ...

Am I wrong to assume that she's not domiciled in the UK if she's lived abroad for th past 30 years (last time she was back in the UK was ~1990) ?

dzug1 says that there will be no UK tax to pay on this (excellent news btw :-) ) ... do I need to notify HMRC anyways ? will the bank have issue accepting funds from the US of about £25000 ?

Thanks for your quick responses and help

Spindler

pjclar02

Hello there

As a UK citizen, presumably born in the UK, the aunt will have a "domicile of origin in the UK". This will make her UK domiciled for inheritance tax purposes and therefore the estate would be liable to UK inheritance tax unless (and this is a big unless!) she later acquired a "domicile of choice", i.e. decided to completely up-sticks and move to Florida.

Whether the aunt has acquired a domicile of choice through her move to Florida will be a question of fact, considering whether she has settled home in the new country and to what extent she has severed her ties in the UK.

If you can provide strong evidence that she severed ties with the UK, then her domicile will become the US. Thus, only her remaining UK assets would be liable to UK inheritance tax.

Capital gains tax and income tax are not at issue.

Hope this helps.

antrobus

spindler wrote: »

...will the bank have issue accepting funds from the US of about £25000 ?

If you're talking about £25,000 then UK inheritance tax won't be an issue irrespective of domicile.

pjclar02

antrobus wrote: »

If you're talking about £25,000 then UK inheritance tax won't be an issue irrespective of domicile.

Not necessarily correct. Remember that the £25k is only the OPs portion of the inheritance. The overall estate may be significantly greater (but it may not...!)

spindler_2

The total estate is about $150,000, so I'm guessing that inheritance tax isn't an issue at all then.

So, do I have to inform HMRC at all ?

Also, any ideas about the most cost effective way to transfer the money into the UK ?

Just using a Swift transfer seems the most straightforward, although I'd guess with exchange rates, timing may well be important ?

Thanks again
Spindler

antrobus

pjclar02 wrote: »

Not necessarily correct. Remember that the £25k is only the OPs portion of the inheritance. The overall estate may be significantly greater (but it may not...!)

Well Ok then.

If you're talking about an estate of £25,000 then UK inheritance tax won't be an issue irrespective of domicile.

Cook_County

There is zero US estate tax and nil UK IHT at that size of estate, but it still may take up to 12 months to get the IRS to give clearance to the estate tax return before property can be distributed.