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.