IHTM27200 - Double Taxation Relief: procedure when both forms of relief apply

Unilateral relief and relief under a DTC are not mutually exclusive. Where both reliefs are prima facie due with reference to the same item of property, relief is restricted by IHTA84/S159 (7) to whichever is the greater. In practice, where the amount of credit is the same under either basis, the credit should be treated as Convention relief.

In cases where, either;

• (a) both reliefs are due, but the unilateral relief appears the greater

or

• (b) the interaction of the two reliefs gives rise to undue difficulty.

You must refer the case to TG. In Scotland, your Team Leader should be consulted in cases of difficulty.

Unilateral relief may be given for a State tax in addition to unilateral orConvention relief in respect of tax levied by the country of which the State formspart.

Example

Deceased, a British citizen, dies domiciled in the UK. His estate includes an apartment in New York, stocks and shares in US Companies and a New York bank account.

The world-wide estate will be subject to UK tax, but US Federal Estate Tax will (because of the terms of the DTC) be payable only on the immovable property in the USA. The UK will give credit for the US tax under the DTC.

NY State will also charge State Estate Tax on the movable assets situate there and the UK will give unilateral relief for this tax.

But the total unilateral and convention credit cannot exceed the amount of UK IHT payable on the property concerned.