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HMRC internal manual

Inheritance Tax Manual

From
HM Revenue & Customs
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Foreign property: Double Taxation Conventions: procedure: procedure when both forms of relief apply

Unilateral relief and relief under a double taxation convention are not mutually exclusive. Where both reliefs would appear to be due on 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, the credit should be treated as convention relief.

In cases where, either:

  • both reliefs are due, but the unilateral relief appears to be the greater, or
  • the interaction of the two reliefs is particularly difficult.

You must refer the case to Technical.

Unilateral relief may be given for a State tax as well as unilateral or convention relief in respect of tax due in the country where the State is situated.

Example

Giles, 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 double taxation convention) be payable only on the immovable property in the USA. The UK will give credit for the US tax under the convention.

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

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