Inheritance tax on UK shares and investments for non UK resident/non domiciliary

Question: I am non-domiciled and non-resident in the UK. I am concerned about any potential liability to UK inheritance tax or other death duties.

I use offshore (Isle of Man) stockbrokers and own shares which are quoted on the LSE. I know that there is an inheritance tax threshold of around £300K but my investments are significantly higher than this.

For inheritance tax purposes will the shares, bought in the Isle of Man by my stockbrokers and held in their nominee account for me be subject to UK tax?

Answer:

As a non UK domiciliary you would only be subject to UK Inheritance tax ('IHT') on assets situated in the UK. Identifying the location of assets can be complex however the general rule is that a shareholding in a Company is located at the place where the title of ownership must be registered. Therefore it is the location of the share register that is crucial. On the assumption that the shares in your case are UK registered the value of the shareholdings (above the nil rate band) would be subject to UK inheritance tax.

Note however that there are special rules for overseas OEIC's and authorised investment trusts that can deem investments in these to be non UK situated for UK Inheritance tax purposes.

If there was a potential liability to inheritance tax you could simply hold any investments via an offshore company. You would then own shares in a non UK resident company which would be excluded from inheritance tax. Any UK registered shares would be held by the offshore company, which would not be subject to inheritance tax.

I would advise that you take detailed advice on this, particularly given any applicable double tax treaties should also be reviewed.

About the Author

He worked in Ernst & Youngs Entrepreneurial Services department for a number of years before setting up his own tax planning practice. He is now a full time tax author.

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