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Where Taxpayers and Advisers Meet

IHT UK & Ireland

AR_Ireland
Posts:3
Joined:Fri Mar 11, 2022 3:01 pm
IHT UK & Ireland

Postby AR_Ireland » Fri Mar 11, 2022 3:04 pm

My father (77) and Mother (72) are both making new wills. They are UK residents who own their own home (no mortgage) with an approximate value of £450,000. In addition, they each have total assets of £540,000 and £330,000 respectively and no debts.
I am a British citizen (50), married with 2 teenage children now living in the Republic of Ireland and likely to remain so until retirement or beyond.
The solicitor who is in the process of making the wills asked me to research the Inheritance Tax (IHT) implications of our situation to identify if the Wills should be formed in such a way to minimize (IHT) for me as an Irish Resident. Do you have any advice please? - any suggestions most welcome

AGoodman
Posts:1738
Joined:Fri May 16, 2014 3:47 pm

Re: IHT UK & Ireland

Postby AGoodman » Fri Mar 11, 2022 8:03 pm

Are you talking about IHT on your parents' deaths or your death?

To be blunt, your personal status is pretty irrelevant on your parents' deaths unless you want to set things up for your own demise.

If he/she is asking whether your parents should leave their assets in discretionary trusts to avoid them being in your estate, that is partly Irish but mostly an English tax question (because the trust would be subject to UK IHT).

If looking at this, he or she should also be looking at your domicile position as IHT is taxed on the basis of domicile rather than residence. You could be resident in Eire but still domiciled in the UK for some time, particularly if you think you might return on retirement.

Given the width of the question and the dependence on your personal circumstances, intentions, financial position and any number of other factors, I'd get some proper advice on the UK position initially (at least to identify the issues and options) then from an Irish adviser.

pawncob
Posts:5090
Joined:Wed Aug 06, 2008 4:06 pm
Location:West Sussex

Re: IHT UK & Ireland

Postby pawncob » Fri Mar 11, 2022 8:41 pm

I'd get another solicitor. Surely it's his job to research the IHT implications.
With a pinch of salt take what I say, but don't exceed your RDA

iwmtaxadvisor
Posts:45
Joined:Wed Sep 09, 2020 5:12 pm
Contact:

Re: IHT UK & Ireland

Postby iwmtaxadvisor » Sat Mar 12, 2022 10:45 am

Good question and I think the lawyer is right to ask you to investigate. Even a tax specialist cannot now cover all taxes, all situations, let alone a lawyer, and triply so for cross border situations where one needs five years on each country pairing to get comfortable (professionally).
I'm a CTA but not a UK-Irish specialist so check everything that follows:-
My understanding is that the Irish CAT will apply to this gift if either one of the following applies.
- The disponer was Irish resident.
- The donee or beneficiary is Irish resident (this one gets you)
- The subject property/asset of the gift or inheritance is an Irish asset
On the assumption you [ARIreland] are the only beneficiary of your parent's estate
- there is a dwelling exemption to CAT on the main residence
- there is also a €225,000 exemption
- the rest is chargeable, and this appears to be at 33%
The UK-Irish DTT offers a broad credit for tax paid in the other country, see https://tinyurl.com/2p9cbpdf so one would expect to pay the highest of both countries, but the starting point is to read the DTT.

Assuming the teenage children would go to a non-Irish university, you might consider suggesting that would be the time to gift anything from your parents to them (no CAT while they are non-resident), assuming any part of the 540k and 330k were excess to their needs and you could confidently arrange for a private client asset manager. You'd have to broaden the brief to your parent's lawyer to go beyond IHT planning in the Will to iIHT planning from now to death.

The mention of a trust might work as the recipient of such a gift in your parent's will, if the trust was not resident in Ireland (and by might I mean you have to look carefully at the irish anti-avoidance). You might possibly end up with a family investment company which housed the 870k with some shares passed during life and upon each death... and this is something I do specialise in. Hope that helps. Feel free to contact me professionally.
Robert Warren
Book a free meeting

AR_Ireland
Posts:3
Joined:Fri Mar 11, 2022 3:01 pm

Re: IHT UK & Ireland

Postby AR_Ireland » Thu Mar 17, 2022 10:19 am

Many thanks to all of those responding to my query - very much appreciated.

Ultimately I guess I am trying to figure out what inheritance I would be due based on the above figures.....and whether it would be more advantageous financially to be a UK resident or an Irish Resident for Inheritance Tax Purposes.

If anyone has the suggested calculations then I would be in dreamland.....

I would be the sole recipient......

Any additional advice most welcome

AR_Ireland
Posts:3
Joined:Fri Mar 11, 2022 3:01 pm

Re: IHT UK & Ireland

Postby AR_Ireland » Thu Apr 07, 2022 12:23 pm

Many thanks to those who responded.
If I am understanding things correctly:
Based on:
Value of parents sole UK residence: £450,000
Value of parents UK assets:: £840,000
Total Asset= £1,290,000

Tax Free Threshold: £325,000
Nil rate band: £175,000
Asset Amount above threshold: £790,000
IHT at 40% = £316,000 which is paid out of the Estate

BUT
As I am a resident of the Republic of Ireland and am the sole beneficiary....
The Total Asset of £1,290,000 (at an exchange rate of 1.2) = Eur 1,548,000
Tax free threshold = Eur335,000
Asset Amount above threshold Eur 1,213,000
IHT at 33% - Eur400,290

As £316,000 has already been paid (and using the same exchange rate of 1.2) = Eur379,200

Considering the double taxation agreement, then is it correct that the Amount of IHT in Republic of Ireland is 33% of (400,290 - 379,200 = 21,090) x 33% = Eur 6959.70....?

Are my IHT figures correct?....Eur 6959.70 to pay in Republic of Ireland plus £316,000 paid in the UK.......

Thank you!


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