Inheritance Tax on assets outside of UK: India domicile of origin
We have a client with Indian DOO, now deemed domicile in UK. He no longer has Indian citizenship only British.
Do the Indian rules still apply as he no longer has Indian citizenship?
What will be needed to put in place for assets located in India and outside of the UK to avoid UK IHT?
Is there any case law that one can review on this subject?
Many thanks for your thoughts and comments.
The Indian Assets can be placed in Trust as the Indian ‘authorities’ do recognise trusts in a not too dissimilar manner to the UK. My company makes use of an Isle of Man Trust Company.
Kevin Jenkins. info@portfoliocounsellingservices.com
Hi Patrick,
Do the Indian rules still apply as he no longer has Indian citizenship?
Yes, They may in regards to only Inheritance Tax. However this is so only if the client is still Indian Domicile person. While he has DOO of India, the question is whether he has acquired domicile of England by choice. This depends on various factors including his longer term intentions and ties with India and UK. If he has indeed retained his domicile of India, the double taxation treaty of 1956 overrides the HMRC deemed domicile status.
What will be needed to put in place for assets located in India and outside of the UK to avoid UK IHT?
This needs a more detailed discussion but it is possible.
Is there any case law that one can review on this subject?
I am unable to find the actual ruling information but there was matter where a person claimed to be of Indian Domicile and he did an affidavit to that effect and stating his intention of moving to India as permanent residence. However on retiring he continued to live in the UK and died while in UK in his 70s. HMRC disallowed his Indian domicile status for Inheritance purposes saying that while he was born in India and had Indian Domicile by Origin he has since then acquired England Domicile by choice and he has put roots in the UK and did not cut his ties with UK. [If anyone can find this matter, please do let me know. I would very much like to find it]
In case of Proles v Kohli suggests the Court may take a sceptical line on those who argue they have not acquired an English domicile of choice after living here for some years. The deceased was an Indian who had come to the UK in his late 40s and set up a restaurant business and acquired property here. He was held to have acquired a UK domicile of choice after less than 15 years’ residence.
Hence proper care must be taken to make use of the double taxation treaty and in my view simply documenting the intention is not sufficient.
Hi, Pavan,
But he cant avoid the death tax: he will pay the death tax in some country, India or UK, but he will need to pay the tax, right? The discussion goes around the domicilie status, than, once we do understand where is the domicile, than we are able to undertstand which country is able to charge the death tax. Thats the question, am i right?