When exactly does inheritance tax become due?

Discussion in 'Wills, inheritances and gifts' started by mct1, Sep 11, 2018.

  1. mct1

    mct1 Frequent Poster

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    Last edited: Sep 11, 2018
    My Uk resident father in law died Feb and his estate is divided equally between my husband (an Irish resident) and his brother in Australia. The UK house was sold, probate was completed last month and the brother-in-law received his share then. My husband however decided to vary his share of the will to include 3 other relations and a charity and that variation is currently being processed by HM Revenue (as is routine). I assume he will receive his share in the next one to three months but could even be next year.

    As this is a second family inheritance for him, sizeable inheritance tax will be due here. Sterling has fluctuated and sunk during the year, and could easily change again, so the date that the tax will be deemed to be due from is significant. Is it when FIL died, when the final sum was known after the house sale, when probate was completed before the will variation, or when Revenue signs off the variation and we actually receive the money?

    Our normally astute accountant doesn't know the answer to this and can only refer us to an expensive tax consultant. We have no faith that revenue will give us a reliable answer either. Hoping for some insight here, thanks.
     
    Last edited: Sep 11, 2018
  2. Joe_90

    Joe_90 Frequent Poster

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    The reason tax advice is expensive is that it needs to be right.

    In general CAT is due based on the valuation date this could be a few dates:
    - the date of death
    - the date of the grant of probate
    - a death when the beneficiary receives or can receive the benefit.

    So in your case it was probably the date of the grant of probate.

    If your husband has disclaimed a portion of his inheritance in favour of a particular person then this disclaimer may not be valid for the purposes of Irish CAT, where your husband is deemed to have taken an inheritance and then gifted it to the beneficiaries.

    Might be money well spent.
     
  3. mct1

    mct1 Frequent Poster

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    Thanks Joe_90, that's helpful. A deed of valuation (which I don't believe exists here) isn't the same as disclaiming the will. It's open to the executor (in this instance my husband) to redistribute the total money/assets if they can show why - fairness, deceased's wishes etc. He did take expert advice on that beforehand. If we want to check whether probate is the relevant determining payment date, isn't it down to Revenue in the end? I just wonder at this stage what we'd have to gain financially from consulting another tax person.
     
  4. hazelgreen

    hazelgreen Frequent Poster

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    I thought there was an agreement between UK and Ireland re double taxation. In this case the father in law's estate will incur inheritance tax in the UK.
     
  5. T McGibney

    T McGibney Frequent Poster

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    Hardly their fault. I'd be more wary of an accountant who pretends to know everything. This is a complex scenario.
     
  6. Gordon Gekko

    Gordon Gekko Frequent Poster

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    Sometimes, words just fail me.

    Your normally astute accountant continues to be astute; obtain a referral to the “expensive” tax consultant.

    People who look to Revenue for guidance on anything remotely complicated are criminally insane, as are people who rely solely on the advice of anonymous strangers online.
     
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  7. mct1

    mct1 Frequent Poster

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    Last edited: Sep 12, 2018
    Ok point taken. I didn't intend criticism of our accountant - my wording was wrong if it sounds like I did. She remains astute but, as I said, can't answer our query.

    @Gordon Gekko thanks for confirming my own thoughts about Revenue - I think we'll avoid that avenue.

    @hazelgreen, yes double taxation normally applies but not in this case as none was due in the UK where the threshold is generous. So we pay tax on the full amount here including previous inheritance from his mother.

    As the consensus of the "anonymous strangers" here is that asking a tax consultant would be best, we'll certainly give that further consideration. Not the same as relying on it... Thanks all.
     
    Last edited: Sep 12, 2018
  8. Gordon Gekko

    Gordon Gekko Frequent Poster

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    I’m not sure you got the subtlety of what I was saying.

    It is astute in itself to say “I can’t deal with this, talk to a specialist”.

    A GP and consultant analogy can be apt when it comes to tax and legals.
     
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  9. mct1

    mct1 Frequent Poster

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    Fair enough
     
  10. T McGibney

    T McGibney Frequent Poster

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    Has your accountant not recommended a tax consultant nor offered to liaise with one in resolving your query?

    Very strange if not.
     
  11. mct1

    mct1 Frequent Poster

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    Yes, as I said in my original post. And we did consult regarding the deed of variation. I think we'll talk to our accountant again and take it from there. Thanks. It was useful hearing different perspectives on this.
     
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  12. tuirse

    tuirse Registered User

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    Interesting point regarding your deed of variation I'm an executor of my uncle's will and I submitted a deed of variation to HRM when completing IHT forms however I also requested that this also be included with details of his will when Probate was granted as its all online in the UK. I'm aware that Inland revenue and HRM share info, however the deed of variation wasn't online with his will. The benefactors who are domiciled in the UK, the residual value of the deceased estate are Irish domiciled and 33% CGT payable - HRM do not want anything. The deceased left Ireland at 14ys old nearly 70yrs ago, the Irish state having utterly failed in its duty to him. Crazy that his estates benefactors end up giving over €100,000, to Irish revenue when English system doesn't want anything despite that state supporting him in later years- NHS granted he worked all his life, as an executor I'm deeply saddened, I'd prefer if HRM took a slice and I'd deal with the double taxation issues
     
  13. mct1

    mct1 Frequent Poster

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    Last edited: Sep 19, 2018 at 10:23 AM
    @tuirse I understand your feelings and I sympathise, but as we know, it's the recipients of an inheritance who pay tax to whatever country they are resident in for tax purposes, according to that country's tax rules. Where the deceased lived has no bearing on the matter. My father-in-law lived his entire life in the UK, but we pay the tax here because that's where we live. I don't mind - the State pays my pension and will (hopefully) pay my husband's in due course. When we die, our money may go to various nephews in Australia (which has 0% inheritance tax). I won't mind that either :).

    I don't know yet what will happen re the deed of variation and Revenue here. I just don't want us to pay more than is fair so if we end up owing tax on money that has been legally gifted (at father-in-law's verbal request) to various people and charities, we will appeal that decision. I'm not sure from your post if Revenue has taken your deed of variation into account in calculating tax due, but if not you can appeal.
     
    Last edited: Sep 19, 2018 at 10:23 AM
  14. jpd

    jpd Frequent Poster

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    Not quite true - in some countries tax is paid by the estate of the deceased and not by the recipients eg UK and in others it is paid by the recipients. I suppose that you could argue that if tax is paid by the estate, then there is less to distribute to the recipients