If H has retained his domicile within the UK, as his wife is non-UK-domiciled s.18(2) IHTA 1984 will apply to the effect that spousal exemption for UK IHT is limited to a lifetime allowance equivalent to the nil rate band (rather than the unlimited exemption where both spouses are domiciled within the UK, or both arte non-UK domiciled).
In reply to the specific questions:
Only to the extent permitted by s.18(2) IHTA 1984 (see above)
I believe so
CGT will also be an issue on the second death
Paul Saunders FCIB TEP
Independent Trust Consultant
Providing support and advice to fellow professionals
The key issue is the domicile status of H. What was his domicile of origin and on what grounds (if any) could he claim non-UK domicile status (presumably an Aussie (or technically a State therein) domicile of choice?
A multiplicity of factors would be examined by HMRC if Aussie domicile of choice claimed. Although by no means a deal breaker, possessing a UK Passport, UK bank account, UK property and family in UK certainly doesn’t help any such argument.