Inheritance tax planning - USERNAME: altyler106 - 13/06/2012
Tax Question:
I am a non resident UK citizen.Living in Manila Philippines.Aged 65 divorced.
my estate is valued at about £2'300'000
My IHT deductable allowances are £1,500,000 inc. Personal allowance £325000 QROPS £800000 and gifts under 7 years and EIS investments. Etc.
leaving me with a IHT amount of £800000 at 40 per cent would leave my estate with a IHT liability of £323000.
My main IHT planning was a Family Settlement Trust set up by Vantis plc ..set up in the sum of £285000 the then personal IHT allowance. This was the shares of a company I owned.This was set up when I was UK resident. the intention was after 7 years this sum would fall out of my estate for IHT purpose. it was just recently discovered by my accountants who moved out of Vantis due to them being put into administration..that the scheme had not been registered with HMRC even though the company shares had been transferred to the Family Settlement Trust.
My accountants state that I would have been liable to CGT? As I am now non resident in the UK.
The trust was in operation for over five years. My accountants now say they will transfer the shares back to my name so I will just get the normal personal IHT allowance of £325000. A solicitor and my accountants are looking into getting back the fees £3200 I paid to set up the trust. This is obviously of secondary importance. I can forward my accountants emails to you if of assistance.
Do you have any suggestions how I can move forward with any IHT planning...?
Answer:
You should definitely get this looked at in detail. I can pass you onto some IHT specialists if you wish.
You could still use a trust structure or could look to simply gift assets such as the UK shares to reduce your estate. As you're now non UK resident this means you can avoid any CGT on a transfer of the shares. As you stated for IHT purposes you would need to survive for 7 years for the value of the shares to be excluded from your estate.
If you have left the UK permanently and are not planning to return you could look into establishing a foreign domicile of choice. If you did this your overseas estate would be exempt from UK IHT. This means you can hold cash and investments overseas and avoid UK IHT. The shares in the UK company (and any UK property etc) could be held by an offshore company to avoid UK IHT if you were a non UK domiciliary. Depending on your assets this could allow UK IHT to be avoided in full.
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About the Author
The Author of this article/answer is our site Editor, Lee Hadnum. Lee is a rarity among tax advisers having both legal and chartered accountant qualifications. After qualifying a prize winner in the Institute of Chartered Accountants exams, he also went on to become a chartered tax adviser (CTA).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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Disclaimer
=============================================================i) Please note that the articles/answers contain general guidance only and do not constitute accountancy, tax, investment or other professional advice.
ii) The contents of this article/answer are for information only and are intended to assist readers in identify any tax planning opportunities that may be available to them. The information contained in this answer is not intended to be a substitute for taking proper taxation advice and should not be relied upon in this way. Always consult a qualified accountant or taxation adviser. Your situation will then be looked at individually and specific advice relevant to your circumstances can be given. The Expert does not accept responsibility for any loss arising as a result of reliance on any information contained in this answer.
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