26 Feb 2015

A question about : inheritance abroad- what should I declare?

Hello,

First of all, my apologies if this has been ansewered elsewhere on the forum. I’ll be happy to be redirected!

My father died last year back home in Belgium. The inheritance declaration has been finalised in December. I am wondering what is the best way to find information about what I should/should not declare to the HMRC. Is it easier to contact them directly, or to pay a financial adviser, or (cheekily) get help here?
I am not after tax evading, but I am a bit unsure I understand all the rules that I’ve read on the HMRC pages.

So, the situation is my mother, my brother and myself inherit like this:
For the money in accounts (cash) and investments (funds and bonds), my mother receive half of it and my brother and me inherit each a quarter (about Ј65,000 after tax), but the usufruct (interest, gains) go to my mother.
For the house and land, my brother and myself receive each half of the value estimated at the date of the inheritance(about Ј50,000) but my mother also receive the usufruct (which at the moment is nil).
We paid inheritance tax in Belgium on all of this.

Am I right thinking that as long as we don’t sell the home or the land, in theory, I should not have to pay additional taxes here, but as soon as we sell, if it’s for a higher amount than the declared one, it should attract capital gain tax and I should declare it in UK?

This is complicated further by a Belgian rule which says that if we sell for a higher price than the declared one within 2 years, the inheritance value is revised and we’ll have to pay additionnal inheritance tax. In that case, should I still pay also capital gain tax here (which seems like paying twice for the same thing)? On the other hand, if we sell after the 2 years period, all gains are for us, so, I guess in that case I should pay capital gain tax here.

Do you think my understanding is right? Should I contact the HMRC with all the facts an figures, or a adviser?

Many thanks for any advice or pointers!

Best answers:

  • As Belgium is in the EU, and yuo have/will have paid tax there, would it not be double taxation if you paid in the UK? Someone with more knowledge than me will know more of course, but I would have thought you would just pay tax on interest once you bring the proceeds to the UK?
  • There is a double taxation treaty in force
    https://www.hmrc.gov.uk/taxtreaties/in-force/b.htm
    Where are you, your mother and your brother resident for tax purposes?
    https://www.gov.uk/tax-foreign-income/residence
  • They are both residents in Belgium. However, despite the double-taxation treaty, there is not such a thing as Capital Gain Tax in Belgium.
  • https://www.gov.uk/tax-sell-property...rseas-property
    You would need to contact HMRC and explain the situation.
  • If I learn nothing else today I now know of the existence of the word usufruct, although I'm still not sure I understand the explanation.
    https://en.wikipedia.org/wiki/Usufruct
  • I know! I used an online dictionary to translate... "usufruit" is fairly common in French...
  • As you are not domiciled within the UK you will also wish to consider if you should elect for the remittance basis.
  • oh, sorry, I should have said that I've been living and working in UK for almost 20 years. Never filled a tax form (or maybe the very first year? paying taxes via the PAYE system).
  • https://www.expertsforexpats.com/expa...and-residence/
    may be of interest.
  • Thanks, I didn't realised that. However, after reading the HMRC guide "Guidance Note: Residence, Domicile and the Remittance Basis", I am none the wiser. It's such a vague notion. It seems to me that it all relies on the question "do you have settled long term commitments in UK, or only short term plans". I have a permanent job and am 50 y.o., single, so, even though I don't see myself finding another job abroad/back in Belgium, who knows... But I probably plan to go back to Belgium when I retire... As for the question "when do you think you domicile changed?", again, it's quite difficult to say as it the same as saying "when did you get the impression that you are going to spend you career/life in UK?". Not sure!!! I've been trying to understand the remittance /remittance charge and it's not that easy for me to understand.... but as far as I understand, maybe the charge is to high, as you say. I guess I will need the help of an adviser on this...
  • That is what I said; if you never decided to stay for ever you are a non-dom. This is decently clear.
    Whether this will save you any tax since 5 April 2008 when UK law changed is a different question as to where you are domiciled.
  • However, looking at it from the other side: in Belgium, the notion of domicile is apparently much clearer, and is, I think, the equivalent of principal residence in UK. Since I have no residence, no bank account, am not registered to any Belgian city council, and my address on my Belgian ID card is the London embassy, I would say that I definitely have not a Belgian domicile, according to the Belgian authority. And if, according to UK, you have to have one (and only one) domicile, it seems to me that by default it has to be in UK...
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