Capital Acquisition Tax (Ireland) or Inheritance Tax (UK)

Does anyone have experience in dealing with taxation in the following scenario?
An Irish person emigrated to the UK, is permanently resident and domiciled there, and has been working there and paying PAYE for more than 20 years. Their surviving parent (Irish resident) recently died and they need to deal with the potential taxation on the inheritance/estate.

I know that in Ireland this is treated as Capital Acquisition Tax and is calculated using a threshold allowance based on the beneficiary's relationship to the deceased. Straightforward enough for the Irish resident siblings.

However, in the UK, Inheritance Tax is calculated based on the value of the deceased's estate. Beneficiaries do not pay.

I can't find anything about how an inheritance would be treated for tax purposes for an Irish ex-pat living in the UK and inheriting from abroad on HMRC website or elsewhere.

Any ideas? I'm sure there must be thousands of similar cases.

Barney Magoo said:

Does anyone have experience in dealing with taxation in the following scenario?
An Irish person emigrated to the UK, is permanently resident and domiciled there, and has been working there and paying PAYE for more than 20 years. Their surviving parent (Irish resident) recently died and they need to deal with the potential taxation on the inheritance/estate.

I know that in Ireland this is treated as Capital Acquisition Tax and is calculated using a threshold allowance based on the beneficiary's relationship to the deceased. Straightforward enough for the Irish resident siblings.

However, in the UK, Inheritance Tax is calculated based on the value of the deceased's estate. Beneficiaries do not pay.

I can't find anything about how an inheritance would be treated for tax purposes for an Irish ex-pat living in the UK and inheriting from abroad on HMRC website or elsewhere.

Any ideas? I'm sure there must be thousands of similar cases.

Click to expand...

The beneficiary is UK resident and domiciled -Yes?

The deceased is Irish resident and domiciled - Yes?

It is the domicile of the deceased person that dictates the exposure to UK Inheritance Tax, the domicile/residence of the beneficiary is not relevant for UK Inh Tax purposes.

Therefore it seems that UK Inheritance Tax would only apply if the deceased person had property situated in the UK, in excess of the current UK Inh Tax threshold of £325,000.

So IMV the beneficiary may only have to pay Irish C.A.T. if the benefit taken from his/her parent exceeds the current Group A threshold, taking into account any other benefits taken from Group A before this one, and all the property in the parent's estate is situated in Ireland, or the property in the UK is less than the above threshold.

I know next to nought about CAT but offer the following

"Gifts or inheritances of Irish property are liable to tax whether or not the disponer is resident or domiciled in Ireland. Foreign property is liable to tax where either the disponer or the beneficiary is resident or ordinarily resident in Ireland at the relevant date."

from here
http://www.revenue.ie/en/tax/cat/gift-inheritance.html

Not an issue if all assets are in Ireland but is an issue if not

4th estate said:

The beneficiary is UK resident and domiciled
BM: Yes

The deceased is Irish resident and domiciled
BM: Yes

It is the domicile of the deceased person that dictates the exposure to UK Inheritance Tax, the domicile/residence of the beneficiary is not relevant for UK Inh Tax purposes.
BM: OK, accepted.

Therefore it seems that UK Inheritance Tax would only apply if the deceased person had property situated in the UK, in excess of the current UK Inh Tax threshold of £325,000.
BM: Seems to contradict the above statement in that the deceased person was domiciled outside the UK so no UK inheritance tax would be payable regardless of the location of an asset of the estate (none in the UK anyway).

So IMV the beneficiary may only have to pay Irish C.A.T. if the benefit taken from his/her parent exceeds the current Group A threshold, taking into account any other benefits taken from Group A before this one, and all the property in the parent's estate is situated in Ireland, or the property in the UK is less than the above threshold.
BM: But the beneficiary is not domiciled/resident in Ireland and surely therefore not liable to CAT?

Click to expand...

Thanks to 4th Estate for your answer. I've added some comments to your answer.
I'm still having some difficulty in understanding if the beneficiary is liable for tax in the UK? As far as I can see they would not be liable for CAT here in Ireland as they are not domiciled/resident here.

hastalavista said:

I know next to nought about CAT but offer the following

"Gifts or inheritances of Irish property are liable to tax whether or not the disponer is resident or domiciled in Ireland. Foreign property is liable to tax where either the disponer or the beneficiary is resident or ordinarily resident in Ireland at the relevant date."

from here
http://www.revenue.ie/en/tax/cat/gift-inheritance.html

Not an issue if all assets are in Ireland but is an issue if not

Click to expand...

Thanks also to hastalavista. It seems to me from reading that link that there is an Inheritance Tax/Gift Tax in Ireland as well as a Capital Acquisitions Tax and that the thresholds are defined in the same way (Category A, B, C).

I think I'll have to go to Revenue for clarification.