UK inheritance tax
In the United Kingdom of Great Britain and Northern Ireland , inheritance tax is levied on acquisition due to death, and gift tax is levied on inheritance tax on gratuity between the living . A capital gain tax may also apply to gifts .
Basics
The inheritance tax ( IHT abbreviated in English ) goes back to an estate tax (tax on estates) levied in England and Wales as early as 1796. It was replaced by Capital Transfer Tax in 1975 and renamed Inheritance Tax in 1986. It is a tax that is directly related to the estate, where the purchaser is not taxed, which is why the personal circumstances of the heir do not matter. This also follows from the Anglo-Saxon understanding of the estate as a separate estate with limited legal capacity. The tax is also levied to a limited extent on gifts. It only covers about 6% of all inheritance cases and its revenue accounts for about 0.8% of total UK tax revenue.
Personal tax liability
A person's worldwide estate is taxable in the UK (unlimited tax liability) if the deceased is domiciled in the UK or if domicile is forged for inheritance tax purposes.
At birth, a legitimate child acquires its father's domicile. An illegitimate child acquires his mother's domicile. The domicile of origin remains until a new domicile is acquired. A domicile of choice is justified by the fact that the person resides in a certain area of law with the will to stay there permanently. Although the place of residence is important in determining the domicile, it is not the only criterion.
For inheritance tax purposes, UK domicile is faked if someone has been resident there for at least 17 years in the past 20 years. If the testator moves abroad, domicile for inheritance tax purposes is accepted for three years after the move.
If the deceased was not domiciled in the United Kingdom, only the property in the United Kingdom is taxable (limited tax liability).
estate
The tax is subject to the estate of the testator plus the gifts made in the last seven years before his death, including those for which he continued to reserve the right to use it free of charge (such as usufruct according to German legal understanding ). Certain special assets created by the testator in view of his death (special trusts ) are also added. The estate is valued according to its market value; tax valuation regulations do not apply.
Tax allowance and tax rate
The estate remains tax-free with a basic amount (so-called nil-rate band ), which is adjusted every year and amounted to GBP 325,000 for 2009 (around EUR 360,000 at the time). The tax exemption is usually increased with the new tax year beginning on April 6th of each year. However, its originally announced increase to £ 350,000 for the 2010/11 tax year has been suspended in view of general economic developments. The exemption relates to the estate, but not to the heir, regardless of how many heirs there are. The excess amount is taxable at 40%. The relationship between the heirs and the testator is irrelevant.
In the case of spouses and registered civil partners whose gifts are exempt from inheritance tax anyway, a basic amount ( nil-band rate ) used by the first deceased cannot be transferred to other family members, usually children ( e.g. because everything is inherited from the surviving spouse or partner) can be transferred to the second inheritance case on the death of the surviving spouse or partner, so that a maximum of twice the exemption (650,000 or 700,000 GBP) can be available for preserving the family assets.
Special tax breaks
The portion of the estate due to the spouse and registered civil partner is exempt from tax liability. If the surviving spouse or registered partner is not domiciled in the UK, only £ 55,000 was exempted from tax until 2013. In response to pressure from the EU, the Finance Act 2013 increased the tax exemption on the general tax allowance and also created the possibility of choosing taxation as a domiciled person.
Certain business assets such as commercial enterprises, agricultural and forestry companies as well as cultural assets can be transferred completely tax-free. Business assets can then be transferred with a valuation discount of 100%, i.e. tax-free, if the company belonged to the testator for the last two years before death. This does not apply to companies that do not carry out any original commercial activity, such as only asset management companies. When transferring majority holdings listed on the stock exchange (which convey control rights), the valuation discount is only 50%.
It is no longer necessary that the beneficiary items are present on the territory of the United Kingdom, the Channel Islands or the Isle of Man . At the insistence of the European Commission , economic goods located in the territory of a member state of the European Union or the European Economic Area were also included.
Gifts
Gifts between living persons are only subject to inheritance tax insofar as they were made within seven years before the death of the testator. Outside this period they are tax-free. Donations to certain special-purpose assets ( trusts ) that are not related to the inheritance (then they would be added to the estate) are taxed at 20%. For gifts from the past seven years that are attributable to the estate, a deduction is made from their value based on the time that has elapsed since the gift was made (after three years at 20% with annual increases of 10% to 80%, so-called taper relief ).
Procedure
An inheritance tax return must be submitted within six months of the death of the testator by the representative of the estate (an executor or administrator), otherwise by the purchaser (as beneficiary), they are also responsible for paying the tax.
Capital gains tax
In donations the capital gain control (may capital gains tax ) apply as a donation is released for treated as a percentage of completion. The tax is levied on the increase in value realized in a real or fictitious sale and is generally attributed to the donor. Profits are taxed at the highest tax rate at which the taxpayer has to tax his income in the same year. When calculating the increase in value, hidden reserves can, under certain conditions, be transferred to the recipient, who then takes the gift of a lower value into his assets (which is to be assumed when a new profit is realized later). As far as legal transactions are related to inheritance tax, there may be exemptions. The capital gains tax is also subject to legal transactions between spouses and registered partners. In the case of gifts, if the spouses or life partners live together, profit realization is avoided in that the transferred assets are also included in the donee's acquisition costs at the cost of the donor. Certain items (e.g. your own car) are exempt from capital gains tax. A special tax allowance is granted for the main residence you use yourself.
See also
Individual evidence
- ↑ Inheritance tax in the United Kingdom (UK)
- ↑ See under: Domicile (English)
- ^ Page of the BBC, accessed on January 6, 2010: Inheritance tax threshold frozen
- ↑ HM Revenue & Customs: unused IHT nil rate band (English) ( Memento from December 4, 2008 in the Internet Archive )
- ↑ HM Revenue & Customs Business, Woodland, Heritage and Farm Relief (English)
- ↑ HM Revenue & Customs Business Relief (English)
- ^ UK Treasury Page, loaded January 10, 2010, HMRC Inheritance Tax: Customer Guide, [1]
- ↑ HM Revenue & Customs: Customer Guide (English)
- ↑ HM Revenue & Customer: Relief for gifts (English) (PDF file; 124 kB); HM Revenue & Customer; Husband, wive and civil partners ( PDF file; 71 kB)
- ↑ HM Revenue & Customs Is your asset liable to capital gains tax (English)
literature
- Felix Oderski: Inheritance law in Great Britain, England and Wales, in: Rembert Süß (Ed.): Inheritance law in Europe, 2nd edition 2008, Zerb-Verlag, Angelbachtal, ISBN 978-3-935079-57-0 , pages 719– 768
- Troll-Gebel-Jülicher: Inheritance Tax and Gift Tax Act , loose-leaf commentary, 37th edition 2009, Vahlen, ISBN 978-3-8006-2402-7 , § 21 ErbStG marginal no. 102 (UK)
