I have an EW dom deceased with an estate where beneficiaries varied to take advantage of the 36% reduced rate. The estate contains French assets (property, chattels and cash) and IHT has been paid both in UK and in France, though we’ll be dealing with a DTT claim.
HMRC’s of the opinion that as the French immoveable assets passed by forced heirship, they do not form part of the general component for the purposes of calculating the baseline amount. I would have thought that as IHT is chargeable on those French assets in the UK, then they should be available in the calculation.
Any thoughts on who is right? I have been given no basis for their assertion.
If the French assets passed by forced heirship, they may have devolved under the Code Civil, and in that case there would have been no “disposition”.
That means that there is no settlement under the wording of §2 s43(2) ITA, which is possibly what HMRC are trying to assert.
To cite Simon’s Inheritance Tax at 14.167:
“It is important to note though that the reduced rate does not apply on the occasion of conditionally exempt property (I4.224) or settled property (I7.531) subsequently becoming chargeable.”
They appear to misread the statute at every available opportunity.
If you need further assistance on the details of the treatment of French reserved rights, for example the statutory devolution of a usufruit to a surviving spouse let me know: 01534 625879