Non resident and UK Inheritance tax - USERNAME:SYLFAEN
Tax Question:
I was born in the UK to UK parents but I have been a non-UK resident for over 20 yrs. but have visited family there sometimes. My 2 brothers & I inherited our mother's 1/2 of a UK house in 2002 and our father has just died so we will assume full ownership.
My brother's have very little income. What would a sudden spike in income do to their tax liabilities? Am I totally exempt from UK taxes regarding inheriting property? If they were to refuse their shares of the house would I be allowed to assume full ownership, rent the property and pay the income into a tax protected fund/investment to create a pension for them?
I was told after the fact, and by my father's solicitor, that a non-UK resident cannot act as an executor for a UK resident. Is this so for a 2010 solicitor-drafted will?
Answer:
In terms of your position you are exempt from UK CGT and income tax on overseas income. The inheritance tax position on your Fathers death will depend on your Fathers position -- not yours. Therefore the IHT due would depend on the value of the estate and his available nil rate band. The fact that you are non resident would not impact on the IHT due on his estate.
If the property was to be rented then the rental income would be split between each property owner and would be taxed at their marginal rate of income tax. You would be subject to basic rate tax at source (ie 20%) on your share unless you filed a claim to receive it gross (with no tax deducted). You may also be entitled to a UK personal allowance (around £6-7K tax free income) depending on the country you are resident in (and whether it has a tax treaty with the UK).
You could put the house in your name and pay income tax on your share of the rental income -- although this may only be attractive if they were higher rate taxpayers (unless the rent was to be substantially offset by your personal allowance). It would depend on the amount of the rent and your Brothers incomes.
As far as I understand it, a non resident can now be an executor.
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.
=============================================================
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.
These Notes (and Disclaimer) do not affect your statutory rights in the United Kingdom.