We can allow credit under IHTA84/S159 for tax paid this is
called “unilateral” relief. Because of the terms of
IHTA84/S159 (2), (3) and (4) it is necessary to consider the situs
(
IHTM27071) of property according to UK
law and, possibly, according to a foreign law when allowing a
credit for foreign tax. You must raise any questions necessary to
establish the situs as soon as it seems likely that a IHTA84/S159
credit will be claimed.
Under IHTA84/S159, credit can be allowed not only on death
but also in respect of lifetime dispositions where some type of
gift tax is charged in the foreign country. The basic conditions to
be satisfied in connection with a lifetime or death transfer are
that both Inheritance Tax and overseas tax must be chargeable by
reference to the same event and attributable to the value of the
same property, and that the foreign tax is similar in character to
IHT. In cases of doubt, you must take advice from TG.
The amount of the credit allowed under IHTA84/S159 is the
Sterling equivalent of the foreign tax paid (converted using the
exchange rate on the date of payment) so far as that tax is
attributable to the foreign property on which IHT has been paid.
Any part of the sum paid to the foreign Revenue authorities
representing interest or penalties should be excluded, as should
any part of the foreign tax that is attributable to income accruing
since the date of the transfer. The relief cannot exceed the amount
of Inheritance Tax charged with respect to the particular item of
property.
SAV (Foreign) will provide the exchange rate required.
Before relief can be finalised, the taxpayer must produce
evidence of payment of the foreign tax in the form of the
assessment of foreign tax (or other document showing details of the
property charged) and the official receipt.
Once you decide on the amount of relief available this should
be entered in the ‘reliefs against tax’ box in the
appropriate ‘raising an assessment’ COMPASS screen. If
necessary, the relief must be apportioned between the instalment
and non-instalment option property assessments. (See
IHTM31189)
The relief cannot exceed the amount of Inheritance Tax
charged with respect to the particular item of property.
No IHT can be treated as imposed on property comprised in a
transfer, which by some provision is made wholly exempt from the
tax. Where a transfer is partly exempt, any tax charged will be
attributed to the chargeable part of the transfer of value. Thus
any wholly exempt property cannot be regarded as taxed in both
countries and any credit will be restricted accordingly.
Where Quick Succession Relief (
IHTM22041) is allowed, the amount of
IHT attributable to the property is the net amount after allowing
the relief.
