If we have a UK dom deceased spouse, and non-dom surviving spouse, I understand that there is a two year time limit to make a death election.
If the death election were not made, and the UK IHT position is still not resolved more than two years after death, is there anything preventing the surviving spouse making a lifetime election, which would effectively increase the time limit to seven years?
Many thanks.
Yes there is a two year limit within which to make a death election IHTA 1984 267ZB(8)].
I believe what you suggest is possible but I think HMRC hold the view that a lifetime election cannot be made after the death (of the transferor spouse).
Others may know if this is in fact HMRC’s view or not.
Malcolm Finney
I agree with Malcolm. The legislation appears to allow a “lifetime election” to be made by the surviving spouse (but not by the surviving spouse’s own PRs) at any time, with the election being retrospective by up to 7 years.
However, HMRC does seem to consider (?infer) that an election after the UK domiciled spouse’s death is not a “lifetime election”. IHTM13042 contains the following:
“Where the person makes the election themselves, we call this a lifetime election, IHTA84/S267ZB(1)(a).
Where a person makes an election following the death of a spouse, or by the personal representatives of the person concerned, we call this a death election, IHTA84/S267ZB(1)(b).
Both these terms reflect the wording used in the IHTA84.”
The commentaries that I have looked at seem to make a similar distinction.
Having a two-year limit to this alteration of the tax treatment of an estate is in alignment with s142 and s144. On the other hand, leaving open the possibility of a tax alteration to an estate for up to seven years is not conducive to the (relatively) prompt conclusion to the administration of estates.
Paul Davidoff
New Quadrant
Thank you Malcom and Paul, that is very helpful.
I’d read that section of the manual a few times and can see how it can be interpreted as you have, and I think you are correct. It would be really useful if the legislation could say categorically that a lifetime election can’t be made after the UK domiciled spouse has died (maybe it does and it is just that I have misinterpreted something along the way). Could it be as simple as the “lifetime” being referred to is that of the UK domiciled spouse and my assumption that it was the lifetime of the non-domiciled spouse is the flaw in my interpretation? That would certainly clear matters up, but I didn’t think I saw anything making that distinction, as obvious as it seems now.
I wouldn’t relish the thought of challenging HMRC on this point and, as interesting as it is, I’ve probably spent too much time looking at the legislation, HMRC manual and various commentary.
Thanks again.
Adam