Introductory tax guides

This subtopic contains introductory guides to the main taxes and tax concepts which are relevant for Private Client practitioners. Previously referred to as Quick Tax Guides, each guide is intended to be an introduction to the key aspects of a particular tax and its applications, as well as compliance aspects.

Inheritance tax (IHT)

The most common incidence of IHT is on the deemed transfer of value that takes place on a person's death. IHT may also be payable on certain lifetime transactions (such as transfers into trust). For a UK domiciled individual, IHT is payable on worldwide assets (with credit for tax paid overseas), whereas a non-UK domiciled individual will, in general and subject to exceptions, only pay tax on assets situated in the UK. The concept of domicile is critical to the scope of IHT.

There are a variety of reliefs and exemptions from IHT, including business property relief, agricultural property relief, normal expenditure out of surplus income, quick succession relief, taper relief and the annual exemption. Furthermore, liabilities and debts may reduce IHT payable.

For a full overview of IHT (including compliance aspects), see Practice

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All in? Court confirms when a settlement is 'made' for the purposes of excluded property (Accuro Trust (Switzerland) SA v The Commissioners for HMRC)

Private Client analysis: This case considered the meaning of 'relevant property' under the settlements regime of the Inheritance Tax Act 1984 (IHTA 1984) and, in particular, the time at which this definition is to be tested. The question arose as to whether the trustees of an offshore trust established by a non-UK domiciled settlor were subject to the UK settlements regime in respect of property added to the trust after the settlor became deemed domiciled in the UK, or whether they were exempt from such charges as the trust consisted solely of excluded property. The First-tier Tribunal (FTT) held that whether trust property is excluded property is based on the status of the trust at the time that it was established, not at the time that the property in question was added to the settlement. As a result, the trust in this case did consist solely of excluded property and no inheritance tax (IHT) charges arose as a result of either the ten-year anniversary or capital distributions. The FTT was also asked to consider whether their jurisdiction was appellate, or supervisory only. The FTT held that, while their jurisdiction was supervisory, the questions raised by the trustees were relevant in establishing whether HMRC had acted reasonably and that the outcome (ie that the paid IHT should be refunded and that no further IHT was due) would be the same in either case. Written by Katherine Willmott, senior associate solicitor at Foot Anstey LLP.

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