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An estate can only be classified as an excepted estate if there’s no IHT due.
Where IHT is due, form IHT400 is required.
Where no IHT is due, there’s still a reporting requirement if the non-dom died holding UK assets. The question is, should it be reported on a form IHT400 or can it be reported on the shorter form IHT207?
To meet the criteria and qualify as an excepted estate all the following conditions must met by the non-dom at the date of death:
However, even if the non-dom’s estate meets the criteria and qualifies as an excepted estate, if the non-dom was born in UK, lived in the UK during their lifetime or made any gifts of UK assets within seven years of death the PR will still be required to report to HMRC on a form IHT400.
If you need to obtain probate to enable you to sell or transfer the UK assets of a non-dom’s estate, you’ll have to complete and submit and IHT400 or an IHT207 to HMRC before submitting the probate application. The Probate Office won’t issue grants for non-dom estates until they receive clearance from HMRC, so if you’re using the wrong form, it’s likely to cause unnecessary delays to the process.
The IHT reporting requirement is separate from the probate application so, even where probate isn’t required, you’ll still need to complete and submit either an IHT400 or an IHT207 to HMRC for a non-dom if they held UK assets when they died.
If no IHT is due but the non-dom held any UK assets (other than cash, quoted stocks and shares), such as real estate property, shares in privately owned companies, etc., when they died, as a PR you’ll need to complete and submit form IHT400, even if the value of those UK assets are no more than £150,000.
If no IHT is due and the estate qualifies as an excepted estate, you’ll still need check if the non-dom was born in or ever lived in the UK and if they’d made any gifts of UK assets within seven years of death before completing an IHT207, instead of an IHT400, to avoid unnecessary delays in obtaining probate.
As a PR of a non-dom, it’s important you know that even if an estate qualifies as an excepted estate, there’s still a requirement to report your UK estate to HMRC (via the IHT400 or IHT207). Just because the estate is excepted, it doesn’t mean the non-dom’s estate is relieved from the reporting requirements.
Below are examples of excepted estates involving non-doms, to demonstrate when PRs are required to file an IHT400 and when it is possible to submit an IHT207 instead.
Adam died domiciled in Australia, where he’d lived and been domiciled all of his life. His estate was predominantly based in Australia and was worth £140,000 in total. However, he owned a plot of land in the UK valued at £50,000. Because Adam’s UK estate consists of assets other than cash and quoted stocks and shares, his PRs will be required to submit an IHT400.
Beatriz was born in Brazil where she lived and had been domiciled for all her life. Her estate consists of her Brazilian residence worth £300,000, her Brazilian bank account had a balance of £20,000 and she owned shares in a UK company listed on the London Stock Exchange worth £30,000. She’d not made any gifts during her lifetime. Although Beatriz’s estate is worth over £150,000, the UK element is only valued at £30,000 and therefore within the threshold to qualify as an excepted estate. Because she’s never been (deemed) domiciled in the UK and her UK estate consists of only quoted shares, Beatriz UK estate qualifies as an excepted estate. Because she wasn’t born and she’d never lived in the UK, and hadn’t made any gifts of UK assets, the PRs of her estate are able to file an IHT207.
Cara was born in the UK, but she’d lived nearly all her life and was domiciled in China. Her estate consists of several Chinese bank accounts with a total balance of £120,000 and a UK bank account with a balance of £20,000. Cara’s UK estate qualifies as an excepted estate. However, because she was born in the UK, her PRs can’t use the form IHT207 and they’ll need to report to HMRC using form IHT400.
Daniel was born in Denmark, where he’d lived and had been domiciled for all his life. His estate consists of several properties, quoted investments and cash in Denmark and elsewhere in the world, with a total value of £3 million. He’d given all his UK properties to his children three years earlier but he still held £25,000 on a UK bank when he died. The estate qualifies as an excepted estate, but because he made gifts of UK assets within seven years of his death, the PRs can’t use the form IHT207 they’ll need to report to HMRC using IHT400. The PRs may also have IHT to pay if Daniel had used all the available allowances during his lifetime.
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30 October 2024
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