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Where Taxpayers and Advisers Meet

inheritance overseas to UK resident foreign citizen

plcanonica
Posts:12
Joined:Wed Sep 29, 2010 3:46 pm
inheritance overseas to UK resident foreign citizen

Postby plcanonica » Mon Mar 13, 2017 8:51 am

My father died recently. He is Swiss and resident in Switzerland, and all his assets are in Switzerland. I am also Swiss but resident in the UK where I live and work (and recently applied for a document certifying permanent residency in the wake of Brexit, but have not yet heard the outcome of the application). Do I need to inform or involve HMRC at all? I do not know where my fiscal domicile is (I pay PAYE income tax in the UK but have never had other sources of income).

AGoodman
Posts:1418
Joined:Fri May 16, 2014 3:47 pm

Re: inheritance overseas to UK resident foreign citizen

Postby AGoodman » Mon Mar 13, 2017 11:56 am

Not particularly, no.

UK IHT is payable by the estate and turns on the domicile of the deceased and the location of the assets. If your father was Swiss, living in Switzerland and no assets were in the UK then UK IHT does not apply. The only exception (which I mention only for completeness) might be if your father had recently spent 17 out of 20 years resident in the UK (so become deemed UK domiciled) and retired back to Switzerland. This might bear some more consideration.

The only thing you will need to report to HMRC will be any income generated by your inheritance and any capital gains on assets disposed of by the estate. As Swiss rules effectively hand over the assets to the heirs (rather than the intervening executors/administrators in the UK), you will probably need to declare your share of income/gains realised since your father's death rather than receipt of the assets - if an issue, it may merit some more thought.

Any declarations should be made on an annual self assessment return for the year and you should get a tax credit for any Swiss taxes paid.

AG

plcanonica
Posts:12
Joined:Wed Sep 29, 2010 3:46 pm

Re: inheritance overseas to UK resident foreign citizen

Postby plcanonica » Mon Mar 13, 2017 12:11 pm

Thank you for your helpful reply. My father has never been UK resident so that is not an issue. His assets however include an apartment block which has been in the family for generations (he inherited it from his father) and is rented, generating income. From your reply am I right in thinking that:
1. If we sell the apartments there will be tax I have to pay in the UK? Is this true even if I keep the money in Switzerland?
2. If we decide to keep renting it there will also be tax to pay on the Swiss income in the UK?

AGoodman
Posts:1418
Joined:Fri May 16, 2014 3:47 pm

Re: inheritance overseas to UK resident foreign citizen

Postby AGoodman » Mon Mar 13, 2017 2:29 pm

I suspect that if the heirs collectively (or just you) sold the building at a gain over "probate" value then yes, there could be CGT to pay.
The three ways out of paying UK tax would be:

(I) there is no gain - ie you sold at the same or a lesser value than the market value at the death;
(ii) any tax is franked by a credit for Swiss tax payable; or
(iii) you elect to be taxed on the remittance basis - this would come with a charge if you have been resident in the UK for 7 years or more and you would still have to pay the tax if you ever remitted to the proceeds to the UK.

In practice, if you sold immediately then the gain over probate value might be tiny anyway.

And, yes, as a UK resident you would be liable to UK income tax on Swiss rental income subject to points (ii) and (iii) above.

The remittance basis charge is £30k after 7 years of residence and £60k after 12 years. From April, you will not be able to elect for the remittance basis after 15 years of UK residence.

AG


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