Views sought on changes to Inheritance Tax regulations
The Government is seeking views on its plans to alter some Inheritance Tax (IHT) regulations in April.
The changes will increase the IHT-exempt amount that a person living in the UK can transfer to a spouse or civil partner who lives abroad. The amendments will also allow individuals living outside the UK and who have a UK domiciled spouse or civil partner to elect to be treated as living in the UK for the purposes of IHT.
HM Revenue & Customs points out that IHT charges are based on domicile status. Individuals domiciled in the UK are liable to pay tax on their worldwide assets; individuals whose domicile lies outside the UK are only liable to pay IHT on assets situated in the UK.
All individuals, irrespective of their domicile status, benefit from an IHT nil-rate band, which is currently £325,000.
Transfers of assets between spouses and civil partners, whether gifts made during a person’s lifetime or transfers of assets occasioned by the death of one of the couple, are generally exempt from IHT.
However, where the spouse or civil partner to whom assets are transferred does not have a UK domicile, there is a lifetime cap on the value of assets that can be transferred free of IHT. The cap is currently £55,000 – this amount has been fixed since 1982.
Under the changes, the limit on the amount that can be transferred exempt from IHT to a spouse or civil partner domiciled outside the UK (or treated as such for IHT purposes) will be increased from its current level of £55,000. Initially the cap will be raised to £325,000. Going forward its level will be linked to any future changes to the exemption limit.
The increased cap will apply to transfers on or after 6th April 2013.
The public consultation period runs until 6th February.
Please contact Michelle Stopford in our Warminster office on 01985 214444 or Sarah Gratton in Westbury on 01373 865577 if you would like more information about the issues raised in this article or any aspect of inheritance tax planning. Or email email@example.com or firstname.lastname@example.org
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