Domicile has historical routes for being known as one’s ‘home’. It is very important to understand your domicile status as this can have a number of tax consequences, especially in relation to UK Inheritance Tax (“IHT”). This article sets out where an individual can be deemed to be domiciled in the UK for IHT purposes and what this means for taxpayers. Please note that this article specifically relates to IHT and does not discuss Income Tax or Capital Gains Tax. What is Domicile? Domicile is a common law concept and can broadly be described as an individual’s permanent home and where they plan to live permanently or indefinitely. For further information on what domicile is and the different types of domicile, please tak...

HMRC has confirmed that the concession for trusts in receipt of small amounts of interest income has been extended to include the 2021/22 and 2022/23 tax years. Under the arrangement, trustees and personal representatives ("PRs") are not required to submit tax returns or make payments under informal arrangements where the only source of income is savings interest and the tax liability is less than £100. Why was the concession introduced? From 6 April 2016, banks and building societies stopped withholding income tax on interest paid to individuals and trusts. Whilst individuals were awarded with a  “Personal Savings Allowance” enabling them to earn up to £1,000 interest tax free, this allowance was not extended to trusts. ...

In its first report from November 2018, the Office of Tax Simplification (OTS) highlighted the significant difference the number of IHT forms submitted each year (275,000), and the number that resulted in inheritance tax (IHT) being due (24,500), highlighting the administrative burden of the current system. In its second report, the OTS provides suggestions of how the system could be made easier to understand, more intuitive, and simpler to operate. Recommendations Lifetime Gifts A number of IHT reliefs/exemptions apply on gifts made during a person’s life. The OTS note that these can be confusing and difficult to apply, and have therefore made the following recommendations: 1 - Replacement of several monetary gift exemptio...

Business Property Relief (BPR) and Agricultural Property Relief (APR) are reliefs that can significantly reduce or offset an Inheritance Tax liability. In previous blogs (see Related Articles below) we have discussed BPR and the issues involved in determining whether this relief is available. This blog will instead focus on APR and the definition of "agricultural purposes". What is APR? APR is available on certain transfers of property. The property can be transferred either as a gift during the individual’s lifetime or on their death. In order for the relief to apply, the following conditions must be met: 1) The property must be agricultural property. This is defined as agricultural land or pasture which is situated in the...

In our previous blog Taxpayer Clears Hurdles for BPR on Livery Business (12 September 2018), we discussed the First-Tier Tribunal (“FTT”) case of The PRs of the Estate of Maureen W.Vigne (Dec’d) v HMRC. In this case, the courts found that the services provided to horse owners (such as providing horses with hay which was grown on the land and removing horse manure from fields, daily health checks of each horse, worming, etc.), in addition to the provision of land for grazing and stabling purposes, were sufficient for Business Property Relief (“BPR”) to be available. Consequently, this allowed part of the estate to benefit from 100% relief from inheritance tax. However, an appeal against this decision was made by HMRC to the U...

As announced in Budget 2018, the government has revived controversial plans to increase probate fees in England and Wales that were scrapped before the 2017 General Election. What is Probate Probate (or more accurately a "grant of representation") is the process by which a deceased’s personal representatives get recognition from UK courts that they are legally entitled to deal with a person’s assets and liabilities (collectively known as their “estate”) after they have died. Probate isn’t always required. For example, estates that are small enough or contain simple assets like cash can sometimes be managed without probate. However, personal representatives for larger, more complex estates or those with land or foreign ...

In a departure from recent cases regarding holiday lets, the First-Tier Tribunal (FTT) has ruled that a holiday let in the Isles of Scilly is eligible for business property relief (BPR) for inheritance tax (IHT). Those looking to claim BPR on their own holiday lets may find this case instructive but should bear in mind that HMRC are likely to challenge claims until clearer precedents are set by higher tribunals or courts. Background Grace Graham and her husband purchased a dilapidated farmhouse within an acre of land in St Mary’s on the Isles of Scilly in 1972. The farmhouse was renovated and extended before being used as B&B and then country house hotel up to 2003. From 2003, the business changed in response to incre...

Trusts and complex estates with tax liabilities or reportable events in 2016/17 are normally required to notify HMRC of this by 5 October 2017. HMRC have now announced that as part of the introduction of the new online Trusts and Estates Register, this deadline has been extended to before 5 December 2017. Trusts and Estates Register The new online register for trusts and complex estates is being introduced as part of the EU’s Fourth Anti-Money Laundering Directive. The new register is designed to streamline the process by which trustees and personal representatives notify HMRC about their trust/estate.  Previously this process was done by paper.  The new service is also aimed at making it easier for details to be updated re...

The decision previously announced by the government to change probate fee charges has now been scrapped. The reason behind this appears to be the snap general election, with the notice from Newcastle District Probate Registry, stating: 'There is not enough time for the Statutory Instrument which would introduce the new fee structure to complete its passage through Parliament before it is dissolved ahead of the general election. This is now a matter for the next Government.' The draft regulations had proposed a new charging structure which would have seen vast increases in the amount payable by larger estates. The changes had been criticised as they were felt to be unfair, unpractical and more akin to a tax than a fee, therefore the scra...

HMRC has quietly made a major change that will allow personal representatives to deal with the tax affairs of estates more simply in future. Normally when a person dies, the personal representatives of the deceased will need to settle any tax liabilities. If the deceased was already registered for self assessment, this could mean filing at least two tax returns in the tax year of death: one for the period from 6 April up to the date of death and one for the period of administration. In practice HMRC will allow personal representatives to informally settle the tax liabilities for the period of administration where: Total income tax and capital gains tax is no more than £10,000; The estate was worth no more than £2,500,000 on de...