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UK Inheritance Tax (IHT) reporting requirements for non-UK (deemed) domiciled individuals

When someone who’s not domiciled in the UK dies holding UK assets, it’s sometimes difficult to understand the UK IHT reporting requirements. We’ve outlined these in this article and you’ll see, there’s a requirement to report even when no IHT is due.
What are the reporting requirements for IHT?

What are the reporting requirements for IHT? 

If you’re a Personal Representative (PR) (Executor/Administrator) of a non-UK domiciled person’s (non-dom) estate, you’ll usually be required to complete and submit a 16 page form IHT400, which has potentially over 20 additional schedules to report the value of the estate to HMRC.

It’s only the value of the UK assets held (or deemed to be held) by the non-dom at the date of death that’s chargeable to IHT. However, if the value of the UK estate is low enough to meet the criteria of an ‘excepted estate’ the IHT reporting requirements are sometimes reduced to a two page form IHT207. 

As a PR, you have 12 months after the death to complete and submit form IHT400/IHT207 or risk penalties for late filing. If IHT is due, you need to pay HMRC by the end of the sixth month after the non-dom died. After this date, interest accrues on the overdue IHT until it’s paid. 

The reporting requirements for IHT purposes are separate from probate applications. It’s possible that you’ll be required to report an estate without the need to apply for probate. For example, if the estate consists of a UK bank account which is jointly owned, the account may automatically transfer by survivorship, which means the account might be transferred to the other owner without the need for probate. However, in this situation, PRs are still required to file an IHT form. Therefore, it’s important to understand the separate requirements when applying for probate and the IHT reporting requirements to avoid delays in getting the grant or failing to report to HMRC within the deadline. 

This article focuses on the reporting requirements for excepted estates for non-doms holding UK assets at the date of death.

About the authors

Allan Wilkinson

+852 2531 7003
wilkinsona@buzzacott.hk
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Virginia Zee

+852 2531 7004
zeev@buzzacott.hk

What are the reporting requirements for IHT? 

If you’re a Personal Representative (PR) (Executor/Administrator) of a non-UK domiciled person’s (non-dom) estate, you’ll usually be required to complete and submit a 16 page form IHT400, which has potentially over 20 additional schedules to report the value of the estate to HMRC.

It’s only the value of the UK assets held (or deemed to be held) by the non-dom at the date of death that’s chargeable to IHT. However, if the value of the UK estate is low enough to meet the criteria of an ‘excepted estate’ the IHT reporting requirements are sometimes reduced to a two page form IHT207. 

As a PR, you have 12 months after the death to complete and submit form IHT400/IHT207 or risk penalties for late filing. If IHT is due, you need to pay HMRC by the end of the sixth month after the non-dom died. After this date, interest accrues on the overdue IHT until it’s paid. 

The reporting requirements for IHT purposes are separate from probate applications. It’s possible that you’ll be required to report an estate without the need to apply for probate. For example, if the estate consists of a UK bank account which is jointly owned, the account may automatically transfer by survivorship, which means the account might be transferred to the other owner without the need for probate. However, in this situation, PRs are still required to file an IHT form. Therefore, it’s important to understand the separate requirements when applying for probate and the IHT reporting requirements to avoid delays in getting the grant or failing to report to HMRC within the deadline. 

This article focuses on the reporting requirements for excepted estates for non-doms holding UK assets at the date of death.

What is an excepted estate?

What is an excepted estate? 

An estate can only be classified as an excepted estate if there’s no IHT due. 

Where IHT is due, form IHT400 is required.

Where no IHT is due, there’s still a reporting requirement if the non-dom died holding UK assets. The question is, should it be reported on a form IHT400 or can it be reported on the shorter form IHT207? 

To meet the criteria and qualify as an excepted estate all the following conditions must met by the non-dom at the date of death: 

  • The gross value of their UK assets must not exceed £150,000; and
  • Their UK assets only consisted of cash/quoted stocks and shares; and
  • They were never UK (deemed) domiciled for IHT purposes.

However, even if the non-dom’s estate meets the criteria and qualifies as an excepted estate, if the non-dom was born in UK, lived in the UK during their lifetime or made any gifts of UK assets within seven years of death the PR will still be required to report to HMRC on a form IHT400.

What should PRs do?

What should PRs do?

If you need to obtain probate to enable you to sell or transfer the UK assets of a non-dom’s estate, you’ll have to complete and submit and IHT400 or an IHT207 to HMRC before submitting the probate application. The Probate Office won’t issue grants for non-dom estates until they receive clearance from HMRC, so if you’re using the wrong form, it’s likely to cause unnecessary delays to the process.

The IHT reporting requirement is separate from the probate application so, even where probate isn’t required, you’ll still need to complete and submit either an IHT400 or an IHT207 to HMRC for a non-dom if they held UK assets when they died.

If no IHT is due but the non-dom held any UK assets (other than cash, quoted stocks and shares), such as real estate property, shares in privately owned companies, etc., when they died, as a PR you’ll need to complete and submit form IHT400, even if the value of those UK assets are no more than £150,000. 

If no IHT is due and the estate qualifies as an excepted estate, you’ll still need check if the non-dom was born in or ever lived in the UK and if they’d made any gifts of UK assets within seven years of death before completing an IHT207, instead of an IHT400, to avoid unnecessary delays in obtaining probate.

As a PR of a non-dom, it’s important you know that even if an estate qualifies as an excepted estate, there’s still a requirement to report your UK estate to HMRC (via the IHT400 or IHT207). Just because the estate is excepted, it doesn’t mean the non-dom’s estate is relieved from the reporting requirements. 

Still unsure of which IHT form to use?

Still unsure of which IHT form to use? 

Below are examples of excepted estates involving non-doms, to demonstrate when PRs are required to file an IHT400 and when it is possible to submit an IHT207 instead. 

Example one

Adam died domiciled in Australia, where he’d lived and been domiciled all of his life. His estate was predominantly based in Australia and was worth £140,000 in total. However, he owned a plot of land in the UK valued at £50,000. Because Adam’s UK estate consists of assets other than cash and quoted stocks and shares, his PRs will be required to submit an IHT400. 

Example two

Beatriz was born in Brazil where she lived and had been domiciled for all her life. Her estate consists of her Brazilian residence worth £300,000, her Brazilian bank account had a balance of £20,000 and she owned shares in a UK company listed on the London Stock Exchange worth £30,000. She’d not made any gifts during her lifetime. Although Beatriz’s estate is worth over £150,000, the UK element is only valued at £30,000 and therefore within the threshold to qualify as an excepted estate. Because she’s never been (deemed) domiciled in the UK and her UK estate consists of only quoted shares, Beatriz UK estate qualifies as an excepted estate. Because she wasn’t born and she’d never lived in the UK, and hadn’t made any gifts of UK assets, the PRs of her estate are able to file an IHT207. 

Example three

Cara was born in the UK, but she’d lived nearly all her life and was domiciled in China. Her estate consists of several Chinese bank accounts with a total balance of £120,000 and a UK bank account with a balance of £20,000. Cara’s UK estate qualifies as an excepted estate. However, because she was born in the UK, her PRs can’t use the form IHT207 and they’ll need to report to HMRC using form IHT400. 

Example four

Daniel was born in Denmark, where he’d lived and had been domiciled for all his life. His estate consists of several properties, quoted investments and cash in Denmark and elsewhere in the world, with a total value of £3 million. He’d given all his UK properties to his children three years earlier but he still held £25,000 on a UK bank when he died. The estate qualifies as an excepted estate, but because he made gifts of UK assets within seven years of his death, the PRs can’t use the form IHT207 they’ll need to report to HMRC using IHT400. The PRs may also have IHT to pay if Daniel had used all the available allowances during his lifetime.

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