Extending the £55,000 IHT spouse exemption for non doms

The recent budget notes indicated that HMRC are considering increasing the £55,000 interspouse exemption for transfers from a UK domiciliary to their non UK domiciled spouse/civil partner. This is planned to apply from 6 April 2013. Whereas transfer between other spouses and civil partners are completely free of inheritance tax, a transfer from a domiciliary to a non domiciled spouse is restricted to £55,000. Note that this restriction doesn't apply to any other types of transfer. For instance a transfer from a non domiciliary to another non domiciled spouse or to a UK domiciled spouse isn't subject to the cap. They've not said what they propose to increase it to, although its likely to be to increase it to the current nil rate band (£325,000). This will obviously be a big benefit for many non doms. Transfers to a non dom spouse will still have a cap, but in many cases this will then be £650,000. This is on the basis of a new £325,000 cap and in addition if they have their nil rate band available, this could also be utilised as well - giving another £325,000. Another proposal was to allow any non doms to elect to be treated as a UK domiciliary for IHT purposes. Presumably the idea here is that they would then not be subject to the cap on transfers from a UK domiciled spouse. Care would however need to be taken with this. In particular, non dom's are exempt from IHT on their overseas estate. If an election was to bring their estate within the scope of UK IHT it could lead to a significant IHT liability.