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HMRC internal manual

Inheritance Tax Manual

Liabilities: law relating to debts: deducting UK debts when there is both UK and foreign property in the estate

If the deceased’s estate includes both UK and foreign assets you should first deduct any UK debts against the UK assets and set the deficit, if any, against the foreign assets. Debts are UK debts if one of the following applies:

  • they are owed to creditors who are resident solely in the UK
  • they are charged on property in the UK, or
  • they are contracted to be paid in the UK.

This practice should be applied, despite the decision in Re Kloebe, Kannreuther v Geiselbrecht [1884] 28 Ch D 175. This was that in the administration of the English estate of a deceased person domiciled abroad, foreign creditors are entitled to be paid, along with those who are resident in the UK, in shares proportionate to their respective claims.

If our official practice is challenged you should refer the case to Technical.