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TAXguide 13/18: Inheritance tax on overseas property representing UK residential property

Finance (No 2) Act 2017 introduced significant changes to the taxation of foreign domiciliaries. In TAXguide 13/18 ICAEW, STEP, the CIOT and the Law Society have published questions and draft suggested answers to highlight and consider areas of uncertainty in the statutory provisions covering the extension of inheritance tax (IHT) to overseas property representing UK residential property interests (Sch A1). Read a summary here and download the full guide.


TAXguide 13/18

All ICAEW members can download this guidance in full.

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This guide is one of four outlining questions and draft suggested answers prepared by committee members of ICAEW, STEP CIOT and LSEW to highlight and consider areas of uncertainty in the statutory provisions introduced by Finance Act (No 2) Act 2017 with effect from 6 April 2017. They cover:

The draft suggested answers in this guide have not been agreed by or commented upon by HMRC and should not be taken as representing HMRC’s views. The Tax Faculty will update this TAXguide when HMRC’s comments have been received.

The draft suggested answers reflect the views of the committee members of the professional bodies involved in their preparation on the generic issues addressed in the questions and draft suggested answers.

The questions and draft suggested answers are intended to assist professional advisers in considering the issues, do not constitute advice and are not a substitute for professional consideration of the issues by such a professional adviser in each client’s specific context.

If you are required to advise a client outside of your experience, we recommend that you consider enlisting specialist help, for example theTax Faculty's Referral Scheme.

Full guide:

The full 15-page guide covers the following questions:

1. 10-year anniversary charge or other chargeable event occurring between contract and completion
2.  Contract and completion and loans
3.  Para 2 (3) de minimis provisions
4. Connected party interests and de minimis provisions
5. Death and connected parties
6. Corporate liabilities
7. Para 3: collateral and relevant loans
8. Scope of relevant loans (1)
9. Scope of relevant loans (2)
10. Scope of relevant loans (3) 
11. Collateral and double charges
12. Collateral or security exceeding amount of borrowing (s162)
What is the position where loans are refinanced and then the property is sold?
ROB and s103 borrowing issues
15. ROB: further queries
16. Collateral and loans to companies
17. Collateral and the two-year rule
18. Meaning of ‘indirectly finances’ in the definition of ‘relevant loan’
19. Lender unsure what a borrower has done with the proceeds of a loan
20. Relevant loan not repaid but company sold
21. Loan to company (non-relevant loan) remains outstanding or is repaid where property or subsidiary holding property is sold
22. Banks and BPR (1)
23.  Banks and BPR (2)
Para 5, Sch A1 – disposals and repayments: sales of shares
25. Mixing of funds from sale caught by para 5
26. Two-year rule and contract/completion
Para 6, sch A1: tax avoidance arrangements (TAAR)
28.  Enforcement and collection
29.  Double tax treaty override and deemed domiciliary
30.  Zero rate and DTT