Past overseas transfers to a non dom spouse

[angkag]

Hi,

My wife and I have been living outside of the UK for the last 20 years. I am UK domicile, she is not, and no plans to be UK domicile.

We have had no financial activity in the UK (no bank accounts or transactions of any description) for the past 20 years, all has been overseas.

Over the years, there have been numerous transfers between my overseas bank account and hers for various reasons, some of which have been in the last 7 years, and some exceed the UK annual gift allowances.

If I were to die after arrival in the UK, as she is a non dom spouse, my understanding is that we would not get the spouse to spouse exemption (this part is clear I think). However, would HMRC want a record of all the past transfers to my wife over the last 7 years ? Or, put another way, can they dig through the last 7 years of an overseas bank account to identify any transfers made ? (assume I will be disclosing the account to HMRC on arrival in the UK so that interest/dividend income is correctly declared etc).

The issue is that the total sum of assets on death would be a little below the current IHT threshhold, however, if adding in transfers over the past 7 years years (and applying the correct percentages to calculate what remains liable for IHT), it would likely be over the IHT threshhold such that theoretically, IHT is due.

I think the key issue is can they dig through past transactions in an overseas bank account.

[angkag]

Sorry, meant to state (kind of key...) that we are both moving to the UK soon with expectation to remain in the UK for about 4 or 5 years while we complete some educational goals - after which, we will leave permanently. So issue is what can HMRC dig up from the past while we are in the UK and I start to file tax returns. I will not be working in the UK, so only income will be dividend/interest/capital gains, mostly in the overseas account, and this will all be declared.

[pqtaxation]

The issue is that the total sum of assets on death would be a little below the current IHT threshhold, however, if adding in transfers over the past 7 years years (and applying the correct percentages to calculate what remains liable for IHT), it would likely be over the IHT threshhold such that theoretically, IHT is due.

I think the key issue is can they dig through past transactions in an overseas bank account.

There is a restricted spouse exemption of £55k (set against all gifts to your wife not just those in 7 years before death) in addition to your NRB. – see IHT manual 11033 linked below-

http://www.hmrc.gov.uk/manuals/ihtmanual/IHTM11033.htm.

If you were to die die it would be the responsibility of your executor (your wife?) to complete your IHT account correctly. But if she alone were your executor, she did not involve UK professionals, she were to return abroad to live shortly after your death, there were minimal/no UK situated assets and your death estate was below NRB +£55k with wife only legatee, then HMRC’s case management in such circumstances might be expected to be pragmatic.

The tests for UK domicile are obviously complex and particular to each individual’s circumstances. Depending on yours, it may not be out of the question for you to succeed in a current claim to have a domicile of choice abroad notwithstanding the intended (short and in term-time only?) period of education in UK.

[maths]

In which country do you both reside?

Depending upon the numbers involved it may make sense for it to be argued (as per pqtaxation) that you have actually acquired a non-UK domicile of choice.

In this case there is unrestricted IHT free inter-spouse transfers (whether in lifetime or on death).