IHTM27188 - Procedure with non-convention countries: relief under IHTA84/S159 (3) and S159 (4)

• Relief is due under IHTA84/S159 (3) where the UK and another foreign country tax the same property and that property is situate: neither in the United Kingdom nor in the foreign country, or
• both in the United Kingdom and in the foreign country.

Where relief is due under IHTA84/S159 (3), it is given on a split credit basis and will be less than the foreign tax paid. The amount of the credit is found by the formula

A/(A+B) ( C

where:

• A is the amount of Inheritance Tax due
• B is the amount of the foreign tax
• C is the smaller of A and B

Country X and the UK tax an item of property which is situate neither in Country X or UK.

Country X charges tax of £40

UK charges IHT of £60

The credit is: 60/(60 + 40 ) x (40) = £24

Where tax is imposed on the same property by two or more foreign countries and the property is situate:

(a) neither in the United Kingdom nor in any of those foreign countries, or

(b) both in the United Kingdom and in each of those foreign countries.

relief is due under IHTA84/S159 (4). The formula, A/(A=B) x C, applies where

• A is the amount of Inheritance Tax
• B is the aggregate amount of the foreign tax imposed in each of the foreign countries
• C is the aggregate of A and B, except the largest amount of tax paid in either A or one of the foreign countries is left out of the sum

Each of Country X, Country Y and the UK tax an item of property which is not situate in Country X, Country Y nor the UK.

Country X charges £40

Country Y charges £20

UK charges IHT of £60

The credit is 60/ (60+40+20) X (40 + 20) = £30

If relief is due under IHTA84/S159 (3)(a) or IHTA84/S159 (4)(a), IHTA84/S159 (5) must be considered when calculating the foreign tax paid (B in the formulas above). If the foreign country has allowed a credit against its tax for tax paid in another foreign country, please refer to TG.

Where relief is due under IHTA84/S159 (3)(b) or IHTA84/S159 (4)(b), above, the foreign tax at B is simply the gross amount paid - no account need be taken of any credit for tax paid in another country.