The Government has announced for the first time today a measure to ensure that foreign currency accounts in UK banks are treated in a similar way to IHT excluded property, in order to restrict the
The Government has announced for the first time today a measure to ensure that foreign currency accounts in UK banks are treated in a similar way to IHT excluded property, in order to restrict the deduction of liabilities on death.
At present IHT is charged on the net value of a deceased's estate after deducting liabilities outstanding when they died, and after deducting available reliefs and exemptions. However property situated outside the UK which belongs to, or was settled by, a non-UK domiciled person is "excluded property" and is not chargeable to IHT.
Finance Act 2013 provided that a deduction for a liability would be allowed only if it had not been used to acquire excluded property, or to maintain or enhance the value of such property. Non-sterling deposits in a UK bank account are left out of account in determining the value of the depositor's estate if they are non-UK domiciled and non-UK resident immediately before death. The deposits are not treated as excluded property but are still not subject to IHT.
The new measure to be introduced in Finance Bill 2014 will treat such deposits in a similar way to excluded property; that means that a liability will not be deductible for IHT purposes where borrowed funds were deposited in the foreign current account, either directly or indirectly. There will be additional rules to cover the treatment of liabilities which are partially repaid before or after death.
The Government does not propose to consult on this measure
At present IHT is charged on the net value of a deceased's estate after deducting liabilities outstanding when they died, and after deducting available reliefs and exemptions. However property situated outside the UK which belongs to, or was settled by, a non-UK domiciled person is "excluded property" and is not chargeable to IHT.
Finance Act 2013 provided that a deduction for a liability would be allowed only if it had not been used to acquire excluded property, or to maintain or enhance the value of such property. Non-sterling deposits in a UK bank account are left out of account in determining the value of the depositor's estate if they are non-UK domiciled and non-UK resident immediately before death. The deposits are not treated as excluded property but are still not subject to IHT.
The new measure to be introduced in Finance Bill 2014 will treat such deposits in a similar way to excluded property; that means that a liability will not be deductible for IHT purposes where borrowed funds were deposited in the foreign current account, either directly or indirectly. There will be additional rules to cover the treatment of liabilities which are partially repaid before or after death.
The Government does not propose to consult on this measure