From 6 April 2017, the UK Inheritance Tax (IHT) law changed, meaning the use of offshore companies to own UK residential property could no longer provide a shelter for IHT. For deaths on or after this date, all non UK domiciled persons will now be liable to IHT at the rate of 40% on all assets in the UK (including real estate) if they are worth more than £325,000 at the time of death.
Who is affected?
IHT is now chargeable on all UK residential property, regardless of ownership structure. These new IHT rules affect all non-UK domiciled individuals (non-doms) whether they are resident in the UK or not.
Anyone who currently owns UK residential property through a company incorporated outside the UK or other opaque vehicle will be liable to IHT on the value of such UK property in the same way as UK domiciled individuals.
The measure will apply to all UK residential property whether it is occupied or let and of whatever value. In the past, UK property held in a company incorporated outside the UK (possibly held in a non UK resident trust) was not a UK asset for IHT purposes and therefore, for non-doms, not subject to IHT.
In the light of these changes it is now more important than ever for anyone with UK assets including residential property to put in place a valid UK Will.
What you can do
Different countries have different rules around inheritance, succession, property and tax. You need a Will that protects your assets as much as possible and ensures that your wishes are carried out in regard to your estate. It is vitally important therefore that any Will meets the requirements in the country in which you have assets and is legally valid.
A properly drawn up Will:
- Include the appointment of Executors who are responsible for administering an estate after death;
- Set out who is to inherit the estate (beneficiaries);
- Make provision if one or more of the beneficiaries have died before the Testator.
If a valid Will is not in place, the UK Intestacy laws will determine how the UK assets are distributed. This could mean that unintended beneficiaries could inherit and the distribution of the estate under the intestacy laws may not be the most tax efficient.
For anyone with UK assets requiring a Will to deal with those assets, seeking professional advice is essential. This will ensure that it deals with the assets in accordance with UK law and works alongside any other Wills where there are assets in other countries or legal jurisdictions.
Mandy Potter is a Chartered Legal Executive at Bartons Solicitors. She is a member of STEP (Society of Trust and Estate Practitioners).