Inheritance Tax, 7 year rule and a gift overseas

dazzammm2

Hi,
I am aware of the 7 year rule for gifts for inheritance tax but have a few question about recipients that live overseas. Assuming the person making the gift dies with 7 years does it make any difference if the recipient lived overseas at the time of the gift. Would it make any difference if recipient was overseas at the time of the gift BUT was living in the UK at the time of the death?

Thanks 

Bookworm105

the estate is liable for IHT not the recipient, in all but a very specific circumstance

More_complicated_than_that

If IHT is due on a gift while the donor is still alive, the tax on the gift would be the liability of the recipient (*).  There would only be tax though if the gift exceeds the remaining nil rate band. 

It doesn't matter where in the world the recipient is living / resident, the recipient is still liable for the UK tax. 

If the recipient doesn't pay the IHT within 12 months of death, the liability will fall on the personal representatives.  

(*) it's a bit different if the gift was expressed to be net of IHT (in which case it is the personal representatives who are liable) or if a trust was involved. 

Jeremy535897

If the recipient is resident and/or domiciled abroad, check whether there are any foreign gift taxes that might apply.

Albermarle

More_complicated_than_that said:

If IHT is due on a gift while the donor is still alive, the tax on the gift would be the liability of the recipient (*).  There would only be tax though if the gift exceeds the remaining nil rate band. 

It doesn't matter where in the world the recipient is living / resident, the recipient is still liable for the UK tax. 

If the recipient doesn't pay the IHT within 12 months of death, the liability will fall on the personal representatives.  

(*) it's a bit different if the gift was expressed to be net of IHT (in which case it is the personal representatives who are liable) or if a trust was involved. 

Regarding the line in bold.
As I understand it, in practice it is quite rare for a recipient of a gift to have to pay any inheritance tax on it.
That is because firstly as you say the gift has to be over £325K, which is very large, so only would involve a small minority.
Secondly the estate will often pay any IHT due in this way. HMRC do not care as long as they get what they are owed.
So in the vast majority of cases, a gift recipient will not be liable for any IHT, but could be in certain specific circumstances.

More_complicated_than_that

Albermarle said:

Secondly the estate will often pay any IHT due in this way. HMRC do not care as long as they get what they are owed.

That might be ok if the donee also gets the residual from the estate.  Otherwise the personal representatives have absolutely no authority to use someone else's money to pay the donee's tax.  With personal liability, it would seem a 'strange' thing to do.