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HMRC internal manual

Inheritance Tax Manual

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HM Revenue & Customs
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Definition and extent of liability: policies effected by a person who dies domiciled outside the UK

Under the proviso to the Customs and Inland Revenue Act 1884 s.11 as amended by the Customs and Inland Revenue Act 1889 s.19, a grant of representation (IHTM05001) in the United Kingdom is not necessary in order to recover money payable under a policy or life assurance effected with any insurance company by a person who dies domiciled outside the UK. For the purposes of this section, any policy under which a sum of money becomes payable on a death may be treated as a policy of life assurance, and any association of persons which issued policies in the ordinary course of its business, whether incorporated or not, may be treated as an insurance company.

These provisions do not confer any exemption from IHT. Where policy moneys are situate in the United Kingdom, tax is nonetheless payable though the moneys may be receivable without the production of a United Kingdom grant of representation.

The insurance company can however be liable for the tax where

  • it retains policy moneys for the benefit of the beneficiary for investment purposes, outside the terms of the life assurance contract, in which case IHTA84/S200 (1)(c) may apply to the company as a vestee, or
  • it received prior notice that the policy in question is subject to a statutory charge for tax under IHTA84/S237.Where there is other estate in the UK in respect of which a UK grant is necessary, but the UK representatives are only administrators acting under a power of attorney and in point of fact have not intermeddled with the policy moneys and, without knowledge of the claim for tax in respect of such moneys, have parted with the assets collected by them to their principal (the foreign executor), the claim in respect of the policy moneys should not be pursued against the UK administrators.

Similar conditions apply in Scotland to a Factor or Attorney authorised by executors abroad to give up an Inventory (in such cases it is the executors who are confirmed, not the Factor or Attorney).

Refer to TG for consideration

  • all enquiries on this topic
  • any case where it is apparent that policy moneys have been paid out without a grant being produced.

(This content has been withheld because of exemptions in the Freedom of Information Act 2000)