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Where Taxpayers and Advisers Meet

domicile election and iht205

tiengodue
Posts:29
Joined:Sat Sep 05, 2020 10:01 am
domicile election and iht205

Postby tiengodue » Tue Dec 29, 2020 10:39 pm

Hello,

If a non dom decides to elect uk domicile following the death of his uk domicilied spouse, would iht205 still be sufficient or is iht 400 needed?
Also should the domicile election statement be sent to the probate office together with the iht205 form?

thanks

maths
Posts:8237
Joined:Wed Aug 06, 2008 3:25 pm

Re: domicile election and iht205

Postby maths » Thu Dec 31, 2020 12:59 am

Depends upon the facts.

Presumably the lifetime election is designed to mitigate the IHT charge on the earlier death of a UK domiciled spouse by taking advantage of the unrestricted inter-spouse exemption.

Form IHT 205 may be used where the spouse's estate qualifies as an excepted estate otherwise IHT 400 needs to be completed.

It is therefore necessary to ascertain if any of the conditions for an excepted estate are satisfied.

The election needs to be made in writing to HMRC; there is no need to supply it with the IHT 205 or 400; indeed the election may not have been made at the time the form is submitted.

tiengodue
Posts:29
Joined:Sat Sep 05, 2020 10:01 am

Re: domicile election and iht205

Postby tiengodue » Thu Dec 31, 2020 9:21 am

Depends upon the facts.

Presumably the lifetime election is designed to mitigate the IHT charge on the earlier death of a UK domiciled spouse by taking advantage of the unrestricted inter-spouse exemption.

Form IHT 205 may be used where the spouse's estate qualifies as an excepted estate otherwise IHT 400 needs to be completed.

It is therefore necessary to ascertain if any of the conditions for an excepted estate are satisfied.

The election needs to be made in writing to HMRC; there is no need to supply it with the IHT 205 or 400; indeed the election may not have been made at the time the form is submitted.
yes it is to mitigate iht. Estate is a bit over the 325k limit but the property can be redirected to children via dov. However the purpose of the domicile election was to take advantage of the unrestricted spouse exemption.
you say there is no need to send the election letter at the same time as the iht forms, but if this is not done aren't hmrc going to send a big iht bill to the non domn spouse?

maths
Posts:8237
Joined:Wed Aug 06, 2008 3:25 pm

Re: domicile election and iht205

Postby maths » Thu Dec 31, 2020 4:40 pm

Form IHT 205 is sent directly to the Probate Registry not to HMRC. The Probate Registry sends the 205 to HMRC and they have 35 days to decide whether to query the Return.

The form is purely a Return of information and contains no calculation of IHT (if any) due. Indeed none should be due if IHT 205 is used (instead of IHT 400).

No additional forms etc should be attached to the 205. The Notes in IHT 206 state:

"What to do with the papers and records you’ve used to fill in the form
You do not need to send in copies of any of
the other papers you’ve used to fill in form IHT205(2011) – just the form itself and any continuation page(s) for box 13. But you should keep the papers and records safe in case we ask you for them".

It is important if you execute a DoV and/or elect for UK domicile status that both are executed before despatching the 205 to the Probate Registry. Keep them as indicated above to produce of necessary.

tiengodue
Posts:29
Joined:Sat Sep 05, 2020 10:01 am

Re: domicile election and iht205

Postby tiengodue » Sat Jan 02, 2021 4:36 pm

hi again a slightly different question.

If one makes an election to become uk domiciled from a certain date, do gifts made prior to that date become liable to iht
or are they excluded?

thanks

maths
Posts:8237
Joined:Wed Aug 06, 2008 3:25 pm

Re: domicile election and iht205

Postby maths » Sat Jan 02, 2021 4:59 pm

Under the election a date needs to be specified from which the deemed domicile status is to commence.

Thus, any gifts made prior to this date were made when non-UK domicile status applied and thus fall outside any IHT charge.

The danger is where a gift was made initially when non-UK domiciled but thereafter an election is made and stated to be from a date prior to the date of the gift which then becomes a gift by a deemed UK domiciled thus falling within a possible IHT charge.

tiengodue
Posts:29
Joined:Sat Sep 05, 2020 10:01 am

Re: domicile election and iht205

Postby tiengodue » Mon Jan 04, 2021 1:15 pm

Hello Maths,

If there is a mirror will btw husband and wife but one spouse dies and the remaining spouse wants to make use of the Residential Nil Rate band to reduce iht upon his death, can a dov be made
so that the property of the deceased spouse goes to the children instead? If so does this need to be done at probate or can it be done later.

maths
Posts:8237
Joined:Wed Aug 06, 2008 3:25 pm

Re: domicile election and iht205

Postby maths » Mon Jan 04, 2021 8:49 pm

Assume spouse dies (S1).

Assume on S1's estate no RNRB applies (eg residential property of S1 left to non-children) say to S1's spouse).

S1 can execute a DoV redirecting his inheritance of S1's interest in the residential property to S1"s child/ren.

DoV must be executed within 2 years of S1's death.

If under the DoV the IHT charge on S1's death is reduced it would be better to execute the DoV asap and in any event prior to the date of payment of the IHT on S1's estate (due within 6 months of S1's death).

tiengodue
Posts:29
Joined:Sat Sep 05, 2020 10:01 am

Re: domicile election and iht205

Postby tiengodue » Mon Jan 04, 2021 9:38 pm

if there is no iht payable is it still better to sort dov immediately and would this neessitate iht 400 rather than iht 205?
hmrc manual does not seem to indicate if iht435 needs filing with iht 400 or if it can be filed with iht205.

maths
Posts:8237
Joined:Wed Aug 06, 2008 3:25 pm

Re: domicile election and iht205

Postby maths » Mon Jan 04, 2021 11:45 pm

You need to determine whether estate qualifies as an excepted estate. RNRB is irrelevant when doing this. Also DoV irrelevant for this purpose.

Both RNRB and DoV only relevant with respect to ultimate IHT liability.

IHT 435 is a Schedule to IHT 400 and would be attached to it.

DoV kept until needed to be produced.


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