Domicile and IHT

Trusts Discussion
1

We have a client scenario whereby:-

• Husband is UK resident and deemed domiciled in the UK
• His wife is UK resident but is not UK domiciled, although she will become deemed domiciled in the UK within the next 4 tax years.
• The husband wishes wish to make a substantial cash give to his wife which will exceed the IHT NRB

Ignoring the domicile election that the wife could consider making, what would happen in relation to the PET made by the husband when the wife becomes deemed domiciled?

  1. Does the PET remain in place until the seven year anniversary has elapsed? or
  2. Does the PET fall away given that the wife is subject to IHT on her worldwide assets after 4 years?

Any comments would be most welcome

Andrew Magilton
TFO Tax LLP

2

Option 1 is correct. The availability of the exemption is determined at the date of the gift. It is the same when there is a gift between two people who subsequently marry, the exemption is not backdated.

Paul Davies
DWF LLP

3

My understanding is that it is the circumstances as at the date of the gift that apply, so that it would not fall out of account upon the wife acquiring a domicile within the UK.

Paul Saunders