Uk inheritance tax

I have inherited from my mother who lived in UK. Tax was paid on her estate to HMRC. I am one of three residual beneficiaries, two of which live in Ireland. Can I offset my tax liability by claiming one third of the UK tax paid? or do I pay as if she were living in this country when she died? The different systems of taxation between the countries are confusing. My father died over 12 yrs ago and a small amount was left to me at that stage. Is that to be added in now or is there a time limit on including such legacies?

hazelgreen said:

I have inherited from my mother who lived in UK. Tax was paid on her estate to HMRC. I am one of three residual beneficiaries, two of which live in Ireland. Can I offset my tax liability by claiming one third of the UK tax paid? or do I pay as if she were living in this country when she died? The different systems of taxation between the countries are confusing.

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Any use?

My father died over 12 yrs ago and a small amount was left to me at that stage. Is that to be added in now or is there a time limit on including such legacies?

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For the purposes of assessing any group A CAT liability? Yes.

There are some clear and fundamental differences between the tax laws of Ireland and the UK. Consequently, where an individual is considering their estate planning and there is a cross-border dimension due to the domicile and/or residence of the individual or beneficiaries, or the acquisition of assets abroad, great care needs to be taken and legal and taxation advice should be obtained, as the advice will differ in each case based on the particular circumstances of the individual.

I have set out some considerations
In this post that may be of assistance

Thank you both. I shall read over a few time til it sinks in!

Marc said:

There are some clear and fundamental differences between the tax laws of Ireland and the UK. Consequently, where an individual is considering their estate planning and there is a cross-border dimension due to the domicile and/or residence of the individual or beneficiaries, or the acquisition of assets abroad, great care needs to be taken and legal and taxation advice should be obtained, as the advice will differ in each case based on the particular circumstances of the individual.

I have set out some considerations
In this post that may be of assistance

Ireland & UK Double Tax Convention - Everlake

Understanding tax rules, Ireland & UK differences, and double tax convention is an essential part of the financial planning process.

everlake.ie

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Hi Marc - your article has also been helpful for me. I have one clarifying question which you may know the answer to.

In the situation where IHT has been paid in the UK, and let's say there are 2 beneficiaries (50% each) in Ireland who are subject to CAT, I am trying to understand the calculation for how much of the IHT paid can be offset by each party under the Double Taxation convention. If the IHT paid was say, 50k, can both parties offset 25k against their CAT liability? Or is the calculation more complex... I've been advised that an "effective tax rate" has to be calculated (IHT paid as a % of the overall estate value) which is then applied to the individual's inheritance to determine the offset. That could be a very different value to the 25k in the example above.

Would you know which method is correct?
TIA.

I think the simple % is correct. There was a good article on this issue in Sunday Independent of June 2nd.

hazelgreen said:

I think the simple % is correct. There was a good article on this issue in Sunday Independent of June 2nd.

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Thank you for the reference to SI article. I just read it now and agree it's a good article. Unfortunately, it doesn't get into the specifics of my question but a useful reference.

I'm finding it hard to get a definitive answer... most articles seem to refer to an "effective rate of tax" but none that I can find are clear about how it should be calculated in both jurisdictions (as the articles state it's the lower of the "effective rates" that apply)

errigal said:

In the situation where IHT has been paid in the UK, and let's say there are 2 beneficiaries (50% each) in Ireland who are subject to CAT, I am trying to understand the calculation for how much of the IHT paid can be offset by each party under the Double Taxation convention. If the IHT paid was say, 50k, can both parties offset 25k against their CAT liability? Or is the calculation more complex... I've been advised that an "effective tax rate" has to be calculated (IHT paid as a % of the overall estate value) which is then applied to the individual's inheritance to determine the offset. That could be a very different value to the 25k in the example above.

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The calculation can be more complex depending on the specific circumstances.

If the estate was comprised solely of UK assets, then it could potentially result in a simple split.

If the inheritance was comprised of Irish & UK assets, the following steps need to be worked out to calculate the credit:-

Step 1: Calculate the proportion of the UK property each beneficiary is taking:

Formula = Inheritance x Gross UK Estate / Gross UK & Irish Estate

Step 2: Calculate the proportion of UK tax referable to each beneficiary:

Formula = UK property in inheritance / Total UK property x UK IHT

Step 3: Calculate the rate of UK tax:

Formula = UK tax referable to inheritance / UK property in inheritance x 100

Step 4: Calculate the rate of Irish tax on each inheritance:

Formula = Irish tax on inheritance / Inheritance x 100

Step 5: Calculate the credit to be given for UK tax:

Formula = UK property x lower of Irish & UK tax rate

Step 6: Determine to whom the credit is to be given

Step 7: Calculate the net Irish tax payable by each beneficiary:


Further info and a helpful example showing the calculation of the credit can be found in Appendix 9 (document pages 72-75) in the Guide to completing the Self Assessment Return (Form IT38)

Thank you. In this scenario, the estate is comprised solely of UK assets.