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HMRC internal manual

Inheritance Tax Manual

From
HM Revenue & Customs
Updated
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Domicile: calculation where the domicile of the survivor at the first death is outside the UK

On the death of the first spouse or civil partner, exemption for assets passing to the surviving spouse or civil partner may be limited to £55,000 in accordance with IHTA84/S18(2) if the surviving spouse or civil partner was not domiciled or deemed domiciled in the UK. [IHTM11033]

If the entire estate passed to the surviving spouse or civil partner, anything over £55,000 is a chargeable legacy. Where the net estate is above the nil rate band plus £55,000 there will be no nil rate band to transfer, as illustrated below.

Example

Susan died in 2002/03. She left an estate worth £450,000 all to her husband Lars who is domiciled in Sweden.

Unused nil rate band calculation

M = £250,000

VT = £395,000 (Estate of £450,000 less limited spouse exemption of £55,000)

M is not greater than VT, so there is nothing to transfer.  

Where the net estate is less than the nil rate band plus £55,000, there will still be an amount of nil rate band available to transfer. This example shows how both the amount that the net estate is below the nil rate band, and limited spouse exemption combine to produce the amount of nil rate band available to transfer.

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Example

Charles died in 2002/03. He left an estate worth £200,000 all to his wife Helga who is domiciled in Sweden.

Unused nil rate band calculation

M = £250,000

VT = £145,000 (Estate of £200,000 less limited spouse exemption of £55,000)

M is greater than VT by £105,000

Transferable nil rate band calculation

E =£105,000

NRBMD = £250,000 so

(105,000 ÷ 250,000) × 100 = 42.0000%

On Helga’s death, the nil rate band on her death would be uprated by 42%. This approach will be appropriate on the death of the survivor when either

  • they remain domiciled abroad and their UK assets exceed the single nil rate band, or
  • between the first death and their own, they became domiciled, or deemed domiciled in the UK.