Tax

Inheritance Tax (IHT) is a tax on the value of the assets that you own (also known as your estate) when you die.

If you have a life interest or right to income in certain types of trusts, IHT can sometimes apply to these trusts’ assets as well. It can also be charged on any gifts to a trust that you’ve made in your lifetime.

IHT is taken from your estate before any assets are distributed between your successors. In some cases, certain assets might have to be sold to pay the tax.

There are a number of reliefs and allowances that reduce the amount of IHT that your estate must pay. For example, assets that you leave to a spouse or civil partner carry an exemption from IHT.

Our inheritance tax solicitors can help you make the most of these reliefs and allowances and ensure that your successors can benefit from as much of your estate as possible.

UK inheritance tax rules are based on your ‘domicile’ rather than your nationality. Your domicile is the place where the tax authorities consider your permanent home to be.

This means that your estate may have to pay UK inheritance tax if you have lived in the UK for several years – even if you are officially still a foreign citizen.

The rules surrounding tax domiciles can be complicated and it’s important to have specialist Tax Residence advice to avoid getting caught out.

Most countries tax you differently depending on whether you’re considered ‘tax resident’ or not.

Tax residence is a slightly different concept to actual residence. This means that you might legally be a tax resident somewhere even if you don’t consider it your home.

Each country has different laws to decide if you’re tax resident based on:

• How long you’re in the country
• Where your family live
• Where you work
• If you own a home in the country
• How much money and assets you own in the country.

The different tax laws in different countries can sometimes conflict, which could mean that you’re a tax resident in multiple countries or that you pay tax on the same income twice.

Your domicile is your official permanent home and can be different to your tax residence. It can have an impact on the income tax, capital gains tax, and inheritance tax that you pay.

You are automatically given your parents’ domicile when you are born. This is known as your domicile of origin.

You keep domicile of origin until you get a new one. Even if you move abroad, your domicile probably won’t change unless you specifically change it.

You need to meet certain criteria if you want to change your domicile. As a minimum you’ll have to:

• Move to another country
• Prove that you plan to live there permanently.

Someone is a non-domiciled or ‘non-dom’ UK resident if they have changed their domicile but still live in the UK. While this can come with tax benefits, it’s complicated to successfully take advantage of them. Get in touch to find out how we can help with non-dom taxes.

If HMRC suspects that you’ve underpaid tax or under-reported income, they can look into your finances with a Code of Practice (COP) 8 or 9 investigation.

They’ll ask you to provide financial information so they can confirm how much you’ve earned and how much tax you should pay.

We can help whether you’re facing an upcoming tax investigation, you’re being investigated already, or you simply want to avoid it happening in the future.

If you’re unhappy with the outcome of the HMRC investigation, you can request an internal review.

This will be carried out by another HMRC officer who has no previous involvement with the case. They can either confirm or change the figures of the original investigation.

If you’re still unhappy, you can appeal the decision in a civil court or tribunal – this starts the litigation process.

 If they still find that you’ve underpaid, you’ll get a deadline to pay the difference, plus interest and a penalty payment. You may be allowed to make payments in instalments.

Wealth structuring combines varied legal and financial advice to help you manage, protect, and grow your wealth. Our wealth structuring advice includes:

• Making and structuring investments
• Setting up and managing trusts and family investment companies
• Protecting assets
• Efficient UK and international tax planning
• Estate planning
• Business law.

Wealth structuring can also involve an array of other legal issues, such as Wills, family, immigration, or property law. As part of one of the UK’s largest private client teams, we have the expertise on hand to support you through whatever situations arise.