Even Non-Resident Expats could Pay UK Inheritance Tax Worldwide at 40%
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ProACT Sam highlights that careful planning of days spent in a country to avoid being deemed non-resident doesn’t protect you from potential UK Inheritance tax.
When will UK Expats be liable to Inheritance Tax at 40%?
Do days when you are not resident in a country impact liability to Inheritance Tax?
What happens across border when someone dies?
Will Brexit make a difference?
Being a Non-Resident Expat doesn’t mean you won’t pay UK Inheritance Tax on your estate when you die.
Protect your family, business and property across border and down generations.
When we die we have the option to put a Will in place to enable the transfer of property, investments and business assets to our next of kin i.e. partner, children and grandchildren. Even so (or if there is no Will), each jurisdiction, each country, will require a probate administration process to settle the affairs of the deceased person.
When Do Expats need a Will or Probate for the UK?
If the largest % of the value of the assets of a deceased person is located in the UK, then UK law requires a worldwide probate administration. This UK asset total could be in the form or UK property, business and/or investments.
A large family home or property rental portfolio could tip the scales, opening up the Expat’s family to Inheritance tax at 40% on the total value of their worldwide assets.
Cash bank accounts are classed as ‘moveable’ assets, and so even in a UK bank they are deemed to be located wherever the Expat is tax resident.
When Do Expats need a Will or Probate for an EU Country?
Under EU law a worldwide probate administration is required for the estate of any tax resident who dies in that EU-based country.
Again the worldwide asset total could be in the form of property, business, investments (in any location including the country of the resident).
Any UK or EU Expat who dies Living and Working Abroad in another EU country will still be subject to assessment for inheritance tax in all countries based upon the inheritance tax rate for the country of death.
Cyprus for example has 0% inheritance tax on death, UK 40%, Germany could be 50% or more.
How are the Tax Authorities Involved?
Under Common Reporting Standards (CRS), taxable events are shared across border, ultimately to your country of tax residence.
A bank, property agent, accountant, lawyers, investment adviser, all are required to register and identify clients by their tax residence. This allows such organisations to report any income or capital taxable events to the source tax office of the agents’ own location. Each source tax authority will then exchange these taxable events with the tax office of their country of tax residence.
Any probate administration needs tax clearance from each jurisdiction in which the deceased person held assets, whether in EU or UK.
Clearly this request across border will be compared to any information received and tax returns completed.
Hence the UK will have notification of any Probate Tax assessment as will the EU administration.
Note this tax exchange goes for property sales in any location also.
How Could Expats Protect Assets?
Expats can protect themselves from UK Inheritance tax at 40% in a number of ways including gifts, Family Trusts and always to Make-a-Will.
Don’t assume your family won’t have to pay. UK Expats could have a liability to death duties on worldwide assets or on some of their UK assets.
Use ProACT Know How to plan ahead and protect assets across border and down generations.
Watch our vlogs and read our blog articles and download guides here.
For a Free Review and assessment of any UK Inheritance Tax liability, contact us.
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