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HMRC internal manual

Inheritance Tax Manual

Foreign property: Double Taxation Conventions: certificate of tax paid: certification of disclosure and tax enforcement procedure with the USA

Before we give up our right to tax assets under Article 5(1) of the double taxation convention (DTC) with the USA, we need the US authorities to certify that:

  • the assets have been disclosed to them and
  • any tax due has been paid or will be enforced.

This is because Article 5(5) of the DTC allows us to tax the property if the USA is unable to enforce its right to tax. HMRC needs to give a similar certification if Article 5(1) of the DTC requires the US authorities to give up their right to tax property.

Until we have a form 742 from the US authorities certifying that the property has been disclosed and that tax has been paid or will be enforced, you should not close any case where:

Article 5 (1) operates to exclude some UK property from the charge to IHT, and

the case would be taxpaying without that exclusion.

You should explain this requirement to the taxpayer and send them two prints of Form 742. You should draw their attention to the paragraphs of the form that they must complete. Where the UK is giving up its taxing rights under the convention, only paragraph 1 applies and paragraphs 2 to 7 are not appropriate. You can close your case when you have received a form that is correctly completed and certified. Refer the case to Technical if there are any errors or any problems arise.

Where the USA gives up the right to tax property under Article 5(1), the US authorities will send two copies of US form 706 CE to us to certify.

Once you have checked the forms (you must not mark them in any way) you should send them to Technical together with the file and a note of any errors or omissions. Technical will then issue the appropriate certificate.