Inheritance Tax
Posted: Sun Jun 09, 2019 11:56 amListened to a “guest speaker” from Blevins Franks on Talk Radio Europe this morning and was quite surprised to hear him say basically this:
Even though you may be a resident in Spain and paying tax in Spain - the double taxation treaty does not apply to inheritance tax. If the U.K. HMRC can justify that you have a substantial connection with the U.K. - then HMRC can take inheritance tax from you and the Spanish tax authorities will still take succession tax from you and these are not covered by the double taxation treaty!
This doesn’t apply to us as we are non-residents but it did sound like people could easily get caught out. The advisor seemed to be saying if you had a property in the U.K. or made frequent visits back to the U.K. then HMRC could count this as “a substantial connection”.
I am guessing now but I suspect some retirees may be directors of businesses that operate in the U.K. or rent out property to boost their retirement income?
Now I know the “advisor” is ultimately looking for new business enquires (and he did say this was one of the easier things to overcome with some pre-planning) but he mentioned that inheritance tax revenues were being targeted by HMRC and were increasing by £160m this year. So, it intrigued me sufficiently to go to look further for a clear definition of “domicile” and I found this on an expat web site - which confirms his phrase of “substantial connection” which in my opinion is very vague and something I can see HMRC rubbing their hands together with glee:
The domicile is the country which a person officially has as their permanent home, or has a substantial connection with. When you're born, you're automatically assigned to the same domicile as your parents, which is defined as your domicile of origin.29 May 2019
Even though you may be a resident in Spain and paying tax in Spain - the double taxation treaty does not apply to inheritance tax. If the U.K. HMRC can justify that you have a substantial connection with the U.K. - then HMRC can take inheritance tax from you and the Spanish tax authorities will still take succession tax from you and these are not covered by the double taxation treaty!
This doesn’t apply to us as we are non-residents but it did sound like people could easily get caught out. The advisor seemed to be saying if you had a property in the U.K. or made frequent visits back to the U.K. then HMRC could count this as “a substantial connection”.
I am guessing now but I suspect some retirees may be directors of businesses that operate in the U.K. or rent out property to boost their retirement income?
Now I know the “advisor” is ultimately looking for new business enquires (and he did say this was one of the easier things to overcome with some pre-planning) but he mentioned that inheritance tax revenues were being targeted by HMRC and were increasing by £160m this year. So, it intrigued me sufficiently to go to look further for a clear definition of “domicile” and I found this on an expat web site - which confirms his phrase of “substantial connection” which in my opinion is very vague and something I can see HMRC rubbing their hands together with glee:
The domicile is the country which a person officially has as their permanent home, or has a substantial connection with. When you're born, you're automatically assigned to the same domicile as your parents, which is defined as your domicile of origin.29 May 2019