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Where Taxpayers and Advisers Meet

Non domiciled spouses

riccardob
Posts:105
Joined:Sun May 29, 2011 10:02 am
Non domiciled spouses

Postby riccardob » Sat Aug 20, 2011 12:38 pm

If a couple own assets of more than 325k in the uk and one of them passess away, is there any tax payable or are they treated as uk spouses ie everything passess to the survyving spouse with no tax payable.

section 44
Posts:4468
Joined:Thu Oct 30, 2008 12:47 pm

Re: Non domiciled spouses

Postby section 44 » Sat Aug 20, 2011 7:26 pm

A couple of what? please clarify.

Is your question: are unmarried individuals the same as married individuals? If so, then no.

maths
Posts:8211
Joined:Wed Aug 06, 2008 3:25 pm

Re: Non domiciled spouses

Postby maths » Sat Aug 20, 2011 9:58 pm

Assuming you are married and each is non-UK domiciled for UK inheritance tax purposes then on the death of one spouse no inheritance tax arises on transfers from one to the other.

riccardob
Posts:105
Joined:Sun May 29, 2011 10:02 am

Re: Non domiciled spouses

Postby riccardob » Sun Aug 21, 2011 10:09 am

Assuming you are married and each is non-UK domiciled for UK inheritance tax purposes then on the death of one spouse no inheritance tax arises on transfers from one to the other.
a) What if one is classed as uk domiciled and the other one isn't?

b) I am no expert but if a couple have lived together all their life how easily can HMRC insist that they have different domiciles although it may suit them to try it on......

maths
Posts:8211
Joined:Wed Aug 06, 2008 3:25 pm

Re: Non domiciled spouses

Postby maths » Sun Aug 21, 2011 11:48 am

If a husband and wife have different domiciles then on death of the spouse with a non-UK domicile no IHT on property left to the UK dom spouse.

However, on the death of the spouse with the UK dom only the first £380,000 left to the surviving non-UK dom spouse is IHT free; any excess over £380,000 taxed at 40%.

Where a married couple have lived together all their life in the UK in practice, although not in theory, HMRC are likely to assert they have the same domicile status. For example, if a UK dom male marries a non-UK dom female and they live in the UK for many years, have children etc then HMRC may well try and suggest that the wife has lost her non-dom of origin and acquired a UK dom of choice; however, this conclusion is by no means necessarily correct and it is perfectly possible for her to retain her non-dom status.

If the marriage is a pre 1.1. then the wife automatically acquired, by law, her husband's dom status on marriage; in such a case it is perhaps more likely that they both have UK dom status thereafter although again this is not necessarily so.

The terms of a double tax agreement may also impact on any dom determination.

Dom status is heavily a factual determination.

Advice is a good idea if the monies warrant it.

riccardob
Posts:105
Joined:Sun May 29, 2011 10:02 am

Re: Non domiciled spouses

Postby riccardob » Sun Aug 21, 2011 4:32 pm

ok but what happens if the couple have lived together for 35 years in Italy (met and married there) and then move to the uk and die here?

Can hmrc argue one parnter is uk dom and the other one isn't ie. the husband is italian national and the wife originally british.

maths
Posts:8211
Joined:Wed Aug 06, 2008 3:25 pm

Re: Non domiciled spouses

Postby maths » Sun Aug 21, 2011 6:39 pm

Did you get married pre .1.1.74?

riccardob
Posts:105
Joined:Sun May 29, 2011 10:02 am

Re: Non domiciled spouses

Postby riccardob » Sun Aug 21, 2011 7:24 pm

yes

maths
Posts:8211
Joined:Wed Aug 06, 2008 3:25 pm

Re: Non domiciled spouses

Postby maths » Mon Aug 22, 2011 12:08 am

Yes it is possible on your (albeit) limited facts that on death HMRC could argue that you died Italian domiciled and your wife died UK domiciled.

However, I suspect that HMRC may accept that on death your had acquired a UK domicile of choice and your wife's UK domicile of origin resurrected on her return to the UK ie you both died with UK domiciles.

dedalus
Posts:58
Joined:Sat Aug 20, 2011 6:36 pm

Re: Non domiciled spouses

Postby dedalus » Tue Aug 23, 2011 1:12 pm

Sorry to steal the thread but may I ask the following:

Can HMRC's position on ones domicile be challenged?

Does this happen in a civil court?

Also does case law apply to these proceedings?

Do HMRC lose any of these cases regarding domiciles and do they have to pay legal costs?

Many thanks.


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