scrumpyjack wrote:Lootman wrote:JohnB wrote:Er, if you are UK domiciled, aren't you liable for all income tax on foreign income and IHT on the assets? I suppose you could always move to a country with no IHT, there are a dozen or so
Not to take us too far off-topic, but you are taxed on non-UK income only if you are UK-resident for that tax year. Domicile doesn't have anything to do with that.
Domicile is harder to lose than residency, and does theoretically mean that you retain a liability for UK IHT. Although in practice if you, your assets, your death and your probate are all overseas, collection of any UK IHT would be somewhere between unlikely and impossible. It is also unlikely that a foreign executor would notify the British authorities of your death. Nor could he/she be penalised for that omission due to a lack of jurisdiction.
And if it was a country with its own IHT then that would take precedence. Also note that some countries tax the beneficiaries rather than the estate.
Has this scenario ever been tested?
HMRC have certainly gone after some expats who died overseas without ever formally shedding UK domicile. It was my understanding that this was mostly for high-value people like billionaires and celebrities. Seems much less likely to happen with your average Joe. After all, that situation has probably applied to millions of expats, most of whom would never bother to lose their domicile.
scrumpyjack wrote:I understand that HMRC can recover IHT from the beneficiaries where the estate does not pay it, so you would have to have only beneficiaries who are non UK resident (and non UK domiciled?) as well as an Executor who was prepared to risk being personally pursued by the UK authorities.
If those beneficiaries were in the UK and HMRC had full information about the death, the Will, the estate and the subsequent transactions then, yes, that is possible. The question is more about how HMRC would get all that information if the only people who have it are overseas and who therefore do not answer to HMRC or UK law.
Ditto for an Executor who is a foreign national and resident. What would HMRC threaten him with if he just ignores their questions? What could the government of Thailand threaten you with if you handled the UK estate of a Thai expat who lived here?
scrumpyjack wrote:The UK authorities would know of the death unless you ceased claiming the state pension before death or your estate continued receiving it after death, which in itself would be an offence of some sort?
That's probably the main way the UK authorities would know that a UK-domiciled non-celebrity had died overseas. Perhaps DWP informs HMRC every time a state pension is terminated, and then HMRC cross-checks that against applications for probate?
Still leaves open the question of how HMRC would obtain more information, however. That would require a lot of work and they'd have to believe that the tax due and the probability of cost-effective collection justifies the effort. That might in turn depend on how co-operative the tax authorities of the two countries were.