IHT on Foreign Asset

I seem to recall that one was able to claim an allowance for the additional expense of recovering a foreign asset. I am dealing with a closed case where the Commonwealth Bank of Australia has refunded a sizeable amount of fees plus interest. The death occurred in 2017, and I have now calculated The additional IHT plus interest which totals approximately £16,000. The bank would not pay it directly to us and we had to use an Australian solicitor to accept payment and then remit it to us after deducting their fees. I would welcome some help!

Patrick, Moroney

IHTM 27050 may provide some assistance.

IHTA84/S173 says that an allowance shall be made against the value of the property outside the UK for the additional costs of administration or realisation of the property which are attributable to it being situated outside the UK.

This allowance is restricted to the lower of:

  • the additional foreign expenses; or
  • 5 per cent of the value of the property.

Thank you, Jerry for your quick response. Before I sent my Question, I did try and search the matter on HMRC IHT but couldn’t find anything.

It has since occurred to me that I should have added a further question, and that is, for IHT purposes, interest accrued to the date of death, if it were paid gross, would normally be netted down for IHT on the basis that the executors would be paying tax at the rate of 20% when they received the interest. In this case Australian tax at the rate of 10% has already been deducted. However as the executors will have to make a return of interest which they will have received to HMRC, it would seem to me that assuming the double taxation agreement between the UK and Australia would enable credit to be given for the 10% paid there, then I should, for IHT purposes net down the interest received for the period to the date of death by 10% to allow for the UK tax element.

Patrick Moroney