For a UK domicile individual, UK inheritance tax (IHT) is payable on their worldwide assets and not just the assets situated in the UK. Moving abroad does not automatically change a person’s domicile status; in fact, it can be difficult to acquire a domicile of choice when overseas.
Please see our article ‘Leaving the UK: but are they leaving UK taxes?
So when a UK domicile individual dies abroad, how is the death registered, and how are HMRC informed?
The death must be registered in accordance with local law of the country in which the individual died. This is usually done by a family member, though this is not a requirement.
The process to register the death will differ between countries. However, the registrar normally requires information including:
- the full name of the person and their last address
- the date and place of death
- the person's date and place of birth
- the person's occupation
- if the person was married, the date of birth of their husband or wife
- whether the person was receiving state benefits
If the death certificate received is not issued in English, it will need to be translated for use in the UK.
Although the death does not have to be registered in the UK as well, doing so allows it to be recorded with the General Register Offices (for England, Wales and Northern Ireland) and the National Records of Scotland. The deceased’s representatives can then order a UK death certificate.
Property in the UK
A grant of representation is required to deal with UK property, monies and other financial assets left by the deceased. No action can be taken without it; this is because legal title proving ownership cannot be transferred until the grant is given. If a valid will is available, the personal representatives, known as executors, will be responsible for obtaining probate and distributing the estate as per the will. Where the individual died intestate (without a will), the next of kin usually applies for representation and the assets are distributed in line with the law of intestacy.
The death certificate is used along with a PA1 form to apply for probate. For a UK domicile individual, the process involves valuing the worldwide estate of the deceased and submitting the details on an IHT400 form and appropriate supplementary forms, then paying any IHT due. Finally, the probate office will provide an appointment to swear an oath with either the office of a commissioner for oaths (usually a solicitor) or the local probate office. The oath is a promise that the information given is true to the best of the executor’s knowledge. Lying under oath is perjury which can carry a fine and /or prison sentence, depending on the extent and impact of the lie.
Once the grant of representation is given, the executors can go about distributing the UK assets of the estate. The executors are also required to contact agencies, such as the Department for Work and Pensions and the Passport Office.
When drawing up a will, it is important to ensure that it is suitable to deal with worldwide assets. It may be necessary to draw up a separate will specifically to deal with overseas property. It is also important to consider that countries have different laws on making provisions for the family in a will. Recent EU laws on succession allow individuals who hold assets in EU states (which have signed up to the agreement) to choose to administer the estate under the national law specified in their will. It is therefore very important to obtain legal advice when drawing up a will. Please see our article – New EU Succession Laws for further detail.
A local equivalent of the grant of representation will be required to administer the assets of the estate in that country. The process of obtaining representation may generally be similar to the UK’s. However, it may be necessary to seek advice from a solicitor with local knowledge.
It is often possible to be taxable in two countries simultaneously. Generally for a UK domicile individual, UK inheritance tax is due for all property within the estate (wherever located). Any immovable objects (such as a house) may also be taxed in the country it is located. Surprisingly, it is in just a few cases that there are effective dual taxation treaties in place allowing the executors to claim a relief for the tax already paid either in the UK or abroad.
The only circumstance where HM Revenue and Customs does not need to be informed of the death is in the rare case where the deceased is not UK domicile, has no UK assets whatsoever in the UK, and receives no state benefits including the old age pension.
Date created: 6th September 2016