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bigduckontax
bigduckontax, Accountant
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If a Non Resident, but domiciled UK citizen dies overseas,

Customer Question

"Hi, If a Non Resident, but domiciled UK citizen dies overseas, with their assets overseas and their will is probated outside of the UK. Who is the the payee of estate tax? Is it the estate or the inheritors? Can you please support the answer with the relevant legislation or case law?"
Thanks - Mike
Submitted: 1 year ago.
Category: Tax
Expert:  bigduckontax replied 1 year ago.
Hello, I am Keith, one of the experts on Just Answer, and pleased to be able to help you with your question. Have a look here for the Gov UK guidance on this subject: https://www.gov.uk/inheritance-tax/when-someone-living-outside-the-uk-dies You should read thus very carefully. The Experts for Expats web site gives the following sage advice summary of the position: 'Even if you are an ex***** *****ving outside of the UK, you will still be subject to inheritance tax in the UK if you are deemed to be of a UK domicile status.If you are UK domicile and your estate is valued at over £325,000 your estate will be subject to inheritance tax - either 40% or 36% on the amount over the threshold. Since 2007, this threshold has increased to £650,000 for married couples and civil partners, providing the executors transfer the first spouse/partners unused inheritance tax threshold to the second partner when they die.It is essential to understand that being classed as non-resident in the UK for tax purposes, as your domicile is unlikely to have changed, you will still be liable for UK inheritance tax (IHT).' This is further reinforced by the Gov UK web site: 'If they aren’t deemed domiciled, their estate:has to pay Inheritance Tax on their assets in the UK - except excluded assetswon’t have to pay UK Inheritance Tax on their assets outside the UK'Inheritance Tax (IHT) is levied at 40% on assets over 325K on death. The 325K limit is inflated by charitable and inter spousal bequests. IHT is payable form the deceased's estate by their executors or administrators, not the beneficiaries thereof. These are standard UK tax rules and require no statutory or case law support as any solicitor will tell you if asked. I do hope my reply has been of assistance.
Customer: replied 1 year ago.
Hi Keith,Thank you for you response. Just to be very clear about the in my question. I'm not asking about the meaning of non-resident or domicile, nor am I enquiring about tax rates or allowances. I'm asking about the responsibility to pay estate taxes on death, when the will is probated off-shore.You say it is the estate which pays: When the person dies, it is the executor(s) who is responsible for the estate. When the executor is in the UK, it makes sense for HMRC to hold that person responsible. In the situation that I'm interested, in the executor is not resident in the UK and not a beneficiary, so I don't understand how HMRC can hold them responsible. Is there any secondary mechanism by which HMRC can hold the individual inheritors responsible to pay the estate taxes?I know its a bit of an obscure point so I'd be delighted to read any documents/legislation/case law etc you can point me to.Thanks *****'m in China so with the time difference, my responses will be very slow, but I'm more interested in accuracy than speed!
Expert:  bigduckontax replied 1 year ago.
As far as I am aware no, Mike. The executor etc, even if overseas, is responsible for the payment to HMRC of any IHT due. This must be done before probate of the UK estate is granted so there is no way that a beneficiary can be asked to pay the tax save in the case of a Potentially Exempt Transfer (PET) following a gift within the proscribed period of seven years and then only if the estates funds are insufficient to pay the tax on the PET. Of course in such international ownership situations it is normal to appoint in the will a local executor to handle such matters. Please be so kind as to rate me before you leave the Just Answer site.

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