Inheritance Tax - If expat dies abroad

[scrumpyjack]

Assuming the individual had a UK state pension and that someone notifies HMRC to stop paying it, then they would be aware the person had died.

Most people who had lived and worked in the UK at some point will have accrued some pension rights but could, I suppose, not claim it in the first place?

[Lootman]

Assuming the individual had a UK state pension and that someone notifies HMRC to stop paying it, then they would be aware the person had died.

Most people who had lived and worked in the UK at some point will have accrued some pension rights but could, I suppose, not claim it in the first place?

I had thought the same thing i.e. that someone who is in this situation could simply not claim their state pension, or write to renounce it, in order that their next of kin or executor does not have to contact a UK authority upon the death.

Of course, after death it should be possible for someone to write to DWP giving that notice without effectively identifying yourself as the responsible person. I assume that does not count as intermeddling for the purpose of setting yourself up as the de facto executor of the estate.

And such a letter will not necessarily identify who the contact person is for any tax claims or inquiries about the death or the estate. In fact it might not even identify which country the deceased had been living in, let alone the addresses of the responsible parties. Sample letter:

"To whom it may concern, please note that Mister X (full name and NIN here) died on nn/nn/nnnn and therefore his state pension should end effective on that date."

[mc2fool]

More generally there is something almost imperialistic or colonial about the idea that the UK could try and tax someone who left the country decades ago.

How long ago did your wife leave the we-tax-our-citizens-no-matter-where-they-live USA? I do believe the US is that only country (developed one at least) that has such an almost imperialistic or colonial practice....

[Lootman]

More generally there is something almost imperialistic or colonial about the idea that the UK could try and tax someone who left the country decades ago.

How long ago did your wife leave the we-tax-our-citizens-no-matter-where-they-live USA? I do believe the US is that only country (developed one at least) that has such an almost imperialistic or colonial practice....

Totally agree, it causes a lot of extra complexity, believe me.

And yes, the US and the UK, perhaps uniquely in the western world, have the conceit to try and project power across borders in this way. The US via citizenship and the UK via the archaic concept of domicile.

[1nvest]

As with many questions about tax, there is the theoretical answer and then there is the practical answer.

The theoretical answer is that if you have UK domicile then you are liable for UK IHT regardless of where you live or die. There are various ways of achieving formal non-domicile status, but the interesting question is really about those who do not do that and so have retained UK domicile.

The practical answer is quite different however. For HMRC to even get to the point of assessing such a tax liability, it would first have to know about his demise. Obviously his death would be registered in Dubai so the UK authorities would not necessarily be informed of the death. In which case the question of IHT quite simply does not arise.

Wouldn't HMRC be informed of the death by Dubai as per the tax treaty and agreed sharing of information? https://www.gov.uk/government/publicati ... x-treaties

Don't know but envisage that Dubai record for person with domestic tax ID of 12345678 cross references to UK individual with a UK ID of ... their NI number, and procedures such that upon notification of death to the Dubai authorities part of the daily/whatever data exchange flags that NI number to HMRC as having been registered as having died. So HMRC no longer progress its share of interest/capital gains (or paying a pension if they were of pension age) against that NI number, and trigger a IHT investigation/progression. Where as part of probate such checks of 'others' - such as HMRC interests are progressed prior to the estate being released.

[Lootman]

As with many questions about tax, there is the theoretical answer and then there is the practical answer.

The theoretical answer is that if you have UK domicile then you are liable for UK IHT regardless of where you live or die. There are various ways of achieving formal non-domicile status, but the interesting question is really about those who do not do that and so have retained UK domicile.

The practical answer is quite different however. For HMRC to even get to the point of assessing such a tax liability, it would first have to know about his demise. Obviously his death would be registered in Dubai so the UK authorities would not necessarily be informed of the death. In which case the question of IHT quite simply does not arise.

Wouldn't HMRC be informed of the death by Dubai as per the tax treaty and agreed sharing of information? https://www.gov.uk/government/publicati ... x-treaties

Don't know but envisage that Dubai record for person with domestic tax ID of 12345678 cross references to UK individual with a UK ID of ... their NI number, and procedures such that upon notification of death to the Dubai authorities part of the daily/whatever data exchange flags that NI number to HMRC as having been registered as having died. So HMRC no longer progress its share of interest/capital gains (or paying a pension if they were of pension age) against that NI number, and trigger a IHT investigation/progression. Where as part of probate such checks of 'others' - such as HMRC interests are progressed prior to the estate being released.

Perhaps someone here who has emigrated can tell us whether their new homeland asked for information like UK NI number? Or other data designed to facilitate such exchange of information possibly decades later?

And that assumes that nation's privacy laws allow for such disclosure to a foreign entity.

Again, does that nation's probate law require notification to the deceased's nation of birth? By corollary does the UK notify the government of Iran when someone who migrated from Iran to the UK decades ago dies here, so that Iranian tax can apply? I doubt it but do not know for sure.

Even so, a determined expat could move again, from say Dubai to Panama, further muddying the waters and breaking any such links.

[scrumpyjack]

As with many questions about tax, there is the theoretical answer and then there is the practical answer.

The theoretical answer is that if you have UK domicile then you are liable for UK IHT regardless of where you live or die. There are various ways of achieving formal non-domicile status, but the interesting question is really about those who do not do that and so have retained UK domicile.

The practical answer is quite different however. For HMRC to even get to the point of assessing such a tax liability, it would first have to know about his demise. Obviously his death would be registered in Dubai so the UK authorities would not necessarily be informed of the death. In which case the question of IHT quite simply does not arise.

Wouldn't HMRC be informed of the death by Dubai as per the tax treaty and agreed sharing of information? https://www.gov.uk/government/publicati ... x-treaties

Don't know but envisage that Dubai record for person with domestic tax ID of 12345678 cross references to UK individual with a UK ID of ... their NI number, and procedures such that upon notification of death to the Dubai authorities part of the daily/whatever data exchange flags that NI number to HMRC as having been registered as having died. So HMRC no longer progress its share of interest/capital gains (or paying a pension if they were of pension age) against that NI number, and trigger a IHT investigation/progression. Where as part of probate such checks of 'others' - such as HMRC interests are progressed prior to the estate being released.

Wherever the person dies, I presume someone will be executor of the estate. If the deceased had UK domicile, a competent executor would know there was a potential UK tax liability. At that point it isn't simply a question of whether the death could be hidden from the UK tax authorities and whether all the assets could be gathered in by the executor without UK probate, but also whether the executor was prepared to knowingly attempt to evade a UK tax liability.

ps apologies for the split infinitive

[Lootman]

Wherever the person dies, I presume someone will be executor of the estate. If the deceased had UK domicile, a competent executor would know there was a potential UK tax liability. At that point it isn't simply a question of whether the death could be hidden from the UK tax authorities and whether all the assets could be gathered in by the executor without UK probate, but also whether the executor was prepared to knowingly attempt to evade a UK tax liability.

That seems more plausible. I guess it would depend on the probate laws of that country and how zealous the executor was. Didn't servodude mention upthread that happened with an Australian solicitor who was handling probate for a Brit who had emigrated there decades earlier?

That still leaves many cases where the deceased had gifted away all his assets whilst alive. Or where all assets were held jointly with a foreign spouse or beneficiary. In those cases there may be no executor and no probate.

[1nvest]

As a interesting aside ...
https://www.kingsleynapley.co.uk/servic ... -questions

Won’t my current Will cover my Dubai assets?

In the UAE, the laws of succession that will apply on your death will depend on whether you are Muslim or non-Muslim. If you are Muslim, then Sharia law will apply. A non-Muslim can make a Will, however, it is up to the local UAE courts to decide whether to uphold the Will. Experience shows that immediately upon death, the deceased’s assets will be frozen (bank accounts, property and even cars) as traditionally, the UAE courts will automatically impose Sharia law which may take many years and much expense to graduate through an appeal cycle to achieve an outcome that reflects the existing Will.

With no Will, Sharia law provides that a surviving wife who has children will qualify for one eighth of her deceased husband’s estate, and a surviving husband who has children qualifies for one quarter of his deceased wife’s estate. The remainder of the estate would be distributed among other family members. In addition, the UAE has no ‘right of survivorship’ concept under which jointly owned property can automatically pass to the surviving owner.

More relevant https://www.iexpats.com/can-hmrc-chase-expats-abroad/

What is the revenue rule?

The revenue rule is a legal agreement between countries not to enforce tax liabilities in their jurisdiction on behalf of another country. Although the rule has been invoked many times, the US FATCA regulations and the Common Reporting Standard are a back-door for tax authorities to swap data without breaking the agreement.

https://mof.gov.ae/fatca-and-crs/

AEOI under the FATCA and CRS regimes is typically achieved by requiring Financial Institutions (“FIs”) that operate in a particular jurisdiction to provide information on reportable account holders (directly or indirectly) to the relevant competent authority. The competent authority in turn exchanges information on such reportable accounts with the competent authorities in each foreign jurisdiction with which the UAE has entered into an exchange agreement (for the purposes of CRS) and the Internal Revenue Service (“IRS”) (for the purposes of FATCA). The relevant competent authority in the UAE is the Ministry of Finance.

[taken2often]

Late to the Post
I do not think in this case there is any claim possible by HMRC.

Although not legal you can live in the UK. Use all the services have millions but keep them offshore. HMRC only know about you if you die and need Probate. To get Probate you must delare all assets and pay IHT if tax due. The Executor has the legal responsibility to be honest about this. If the Executor is offshore, I cannot see their obligation to communicate with HMRC. Of course it would have to be really offshore, that has no communications with HMRC, so that you do not exist.

So more a moral question

[Lootman]

The Executor has the legal responsibility to be honest about this. If the Executor is offshore, I cannot see their obligation to communicate with HMRC. Of course it would have to be really offshore, that has no communications with HMRC, so that you do not exist.

In my more mischievous moments I have wondered about appointing a foreign resident and national as my executor.

They could still potentially be held personally responsible of course. But how that would/could be enforced is an interesting question.

[scrumpyjack]

This is an issue HMRC is aware of, see this discussion paper

https://www.gov.uk/government/consultat ... -responses

If the executor is non UK resident and the assets are all abroad, it might be possible for him/her to evade IHT due under UK law, but it would be risky given the long arm of HMRC, and their increasing co-operation with overseas tax authorities. One has to ask why would the executor be prepared to take the risk? Perhaps if they were the beneficiary and were not a professional who could be disbarred or whatever if discovered.

It may well be that HMRC keep on their databases details of high net worth individuals who move overseas!

[Lootman]

One has to ask why would the executor be prepared to take the risk? Perhaps if they were the beneficiary and were not a professional who could be disbarred or whatever if discovered.

I think that is important. A professional executor would have no reason to risk their professional license for such a thing. A lay executor who is also a residual beneficiary is a very different story. Plus a lay executor would probably never conceive that such a foreign liability from decades ago could possibly exist.

And there is the other issue I stated before - all the estates which do not need probate, so there is no executor.

It may well be that HMRC keep on their databases details of high net worth individuals who move overseas!

Yes, I wonder whether the real target here is the small number of very rich expats like Branson and Dyson, whose deaths and location would be big news in the public domain. OTOH there must be millions of expats around the world for whom it would not be cost-effective to try and go after.

[scrumpyjack]

Well I think there would be an executor, wherever the deceased died, but they would not need UK probate to give legal backing to their authority to execute the provisions of the Will.

[Lootman]

Well I think there would be an executor, wherever the deceased died

There is always a named executor in a Will. But that doesn't mean that he/she has to act as executor. They can renounce the role or simply not start the process. And they cannot be held personally liable for debts of the estate if they never took on the role. Nobody can be forced to execute probate.

So in any case where the named executor sees that the estate has no assets, and declines to act, then he/she could not be held personally liable for debts or taxes. Which leaves the creditors to do the hard work.

This applies even if it is purely a UK matter. If everyone and everything is overseas then it becomes even more difficult for UK creditors.

[scrumpyjack]

Well I think there would be an executor, wherever the deceased died

There is always a named executor in a Will. But that doesn't mean that he/she has to act as executor. They can renounce the role or simply not start the process. And they cannot be held personally liable for debts of the estate if they never took on the role. Nobody can be forced to execute probate.

So in any case where the named executor sees that the estate has no assets, and declines to act, then he/she could not be held personally liable for debts or taxes. Which leaves the creditors to do the hard work.

This applies even if it is purely a UK matter. If everyone and everything is overseas then it becomes even more difficult for UK creditors.

Wherever this takes place, unless the assets are cash in the form of banknotes, or gold bars, they will need to be transferred to the beneficiaries and I imagine that might be difficult unless whoever is acting as executor can demonstrate they have the legal right to take control of the assets.

Of course if the deceased has no assets then it isn't a problem, but neither is IHT a problem

[Lootman]

There is always a named executor in a Will. But that doesn't mean that he/she has to act as executor. They can renounce the role or simply not start the process. And they cannot be held personally liable for debts of the estate if they never took on the role. Nobody can be forced to execute probate.

So in any case where the named executor sees that the estate has no assets, and declines to act, then he/she could not be held personally liable for debts or taxes. Which leaves the creditors to do the hard work.

This applies even if it is purely a UK matter. If everyone and everything is overseas then it becomes even more difficult for UK creditors.

Wherever this takes place, unless the assets are cash in the form of banknotes, or gold bars, they will need to be transferred to the beneficiaries and I imagine that might be difficult unless whoever is acting as executor can demonstrate they have the legal right to take control of the assets.

I was thinking more of the case where the deceased owned the assets jointly with the beneficiary. Or had gifted away everything prior to death.

In which case there is no transfer, no probate and no executor. UK IHT is still due but the process to determine and collect that seems fraught.

[taken2often]

Perhaps a British Embassy or consul has an instruction in every country to read the Register of Deaths to see if there are any UK citizens listed. Even then a foreign Executor may be reluctant to produce any information regarding the estate. A careful choice of country would seem to be essential.

If the Offshore assets are left to a non UK citizen how could HMRC make a claim

We are no doubt tied by Pensions, Investments and property needing Probate or Confirmation. More and more people will start to have great reluctance to pay IHT as it is not indexed and is seen by most payers as unfair.

This makes ISA investing instead of pension attractive if you intend to move on before death. Sell property, liquidate ISA and move on. You no longer exist. Joint account offshore would work.

This highlights the problem of high tax, a modest amount say 10% no one would bother.

Bob

[Charlottesquare]

The thing is that if they no longer have any connection to the UK, the executors should be able to claim that the deceased was no longer domiciled in the UK, especially if they have no bank account or other assets in the UK and are buried abroad. If the deceased had say a property in the UK that will need UK probate and that would firmly bring the entire estate within the orbit of HMRC. In this case, especially if the deceased is buried abroad, he appears to have severed all connections with the UK and so I cannot see that IHT is due in the UK. I would feel more comfortable doing that than just hoping/expecting that HMRC will discover nothing about the situation.

Understood. Good point about where the burial (or cremation) is. Had not thought of that.

But the thing with domicile is that it is such a fuzzy concept. So yes in theory if you have severed all links with the UK then what you say should hold water. But how can you be sure? The attitude of HMRC about this, as with many things, is not to be drawn on it. They deliberately keep things vague. Rather they invite you to submit all the information and then they will graciously make a determination that you are or are not a non-dom.

Given that level of uncertainty, isn't it likely that people leaving the UK would rather just not subject themselves to that ordeal. And simply go quietly into that dark night?

I vaguely remember from the very distant past a domicile case where ownership of a UK burial plot was considered an influencing factor (cannot remember if it was even used) though not sure HMRC would try these days to hang on to such a limited link, the argument against it indicating non domicile in whatever country domicile was now claimed being that whilst living the non dom still had no intent to leave his/her existing domicile.

HMRC guidance (always read with a pinch of salt) is here, I believe the burial plot no longer features within their considered factors.

https://www.gov.uk/hmrc-internal-manual ... ance-basis

[Dod101]

I must say that owning a burial plot could hardly give a clearer indication of where one wants to be buried. Were I intent on disproving domicile I would get rid of a burial lot in the old country irrespective of what the HMRC Manuals say or do not say. It is not something many of us go around collecting.

Dod