INHERITANCE TAX ( IHT ) - Warning Stealth Tax Alert
Inheritance Tax was introduced with effect from 18 March 1986. It is a tax on gifts on death or within seven years of death. It can also be payable in other circumstances, mainly gifts to a discretionary trust.
An individual domiciled in the UK is liable to IHT on all chargeable transfers of assets where ever situated.
An individual not domiciled in the UK is liable to IHT on assets situated in the UK only.
DOMICILE
Very broadly speaking (and simplifying a great deal) you are domiciled in the country that you regard as "home".
A person acquires at birth the domicile status of their father (or mother if the parents are unmarried).
The domicile is retained throughout life unless you make a positive decision to adopt another country by taking up residence there with the intention of remaining there permanently.
It follows that a first generation migrant to the UK who retains the intention of leaving the UK on retirement will usually remain domiciled outside the UK.
The children of a first generation migrant can also remain domiciled outside the UK providing they maintain the intention of returning to sunnier climates.
DEEMED DOMICILE
There is a special "deemed domicile" rule. An individual is deemed domiciled if :
However it is impossible to ascertain the Inheritance Tax position for a deemed domiciled individual who leaves the country. We have attempted to obtain clarification on this point from the Inland Revenue Capital Taxes Taxpayer Services Group and have been advised "since we do not "deem" someone to be domiciled for Inheritance Tax purposes during their lifetime we cannot suggest to you at what point they would not be." This was no help whatsoever and hardly a Taxpayer Service.
The table below denotes the threshold at which Inheritance Tax ( IHT ) becomes payable.
| Year | £ |
| 2003 / 2004 | 255,000 |
| 2002 / 2003 | 250,000 |
| 2001 / 2002 | 242,000 |
| 2000 / 2001 | 234,000 |
| 1999 / 2000 | 231,000 |
| 1998 / 1999 | 223,000 |
| 1997 / 1998 | 215,000 |
| 1996 / 1997 | 215,000 |
The rate of Inheritance tax is 40%
AUTHORISED BY THE INSTITUTE OF CHARTERED ACCOUNTANTS IN ENGLAND AND WALES TO CARRY ON INVESTMENT BUSINESS