IHTM11033 - Spouse or civil partner exemption: spouse/civil partners domiciled outside UK

The exemption is limited to £55,000 where immediately before the transfer

• the transferor is domiciled ( IHTM13031) in the United Kingdom, or is treated as so domiciled under IHTA84/S267, but
• the transferor’s spouse or civil partner ( IHTM11032) is neither domiciled nor treated as domiciled in the United Kingdom

The £55,000 limit does not apply if

• both the transferor and their spouse or civil partner are domiciled outside the UK, or
• the transferor is domiciled outside the UK but the spouse or civil partner is domiciled in the UK

The £55,000 limit applies to

• the value before grossing ( IHTM26121)
• the cumulative total of all transfers to a spouse or spouses or civil partner domiciled outside the UK. So you should take into account the amounts allowed under earlier transfers in which the IHTA84/S18 (2) limitation applied in considering whether the £55,000 is exceeded
• transfers on or after 9 March 1982. For transfers before that date the limit was lower, and you should refer to the Taxes Acts 1982 Edition held in the library

Where the £55,000 limit is exceeded, you should allocate the exemption in the manner which is most favourable to the spouse or civil partner. Factors you should bear in mind include the incidence of tax and the availability of business relief ( IHTM25131), agricultural relief ( IHTM24001) or other reliefs.

Example 1

In 1998, Mr A, who was domiciled in the UK transferred £200,000 to Mrs A, who was not domiciled in the UK. Of this transfer, £55,000 is exempt under IHTA1984/S18(2), and £145,000 is a PET and assumed to be exempt. Mr A dies in 2007 and leaves all his property to Mrs A, who remains domiciled outside the UK. Even though Mr A has survived for 7 years after making the transfer, the limited exemption under IHTA1984/S18(2) has all been used and is not available on Mr A’s death.

Example 2

In 1998 Mr A transfers a UK property worth £500,000 to Mrs A. Both are domiciled outside the UK. Exemption under IHTA1984/S18(1) is available in full. In 2006 Mr A is deemed to be domiciled in the UK and a year later gives £100,000 to Mrs A who remains domiciled outside the UK. The limited exemption under IHTA1984/S18(2) is not then available because the amount of exemption already conferred under IHTA1984/S18 as a whole exceeds £55,000.