Part 4: The future: inheritance tax
36.Paragraph 20 provides that Part 4 concerns inheritance tax. It applies where an individual P with financial assets in Switzerland dies on or after 1 January 2013.
37.Paragraph 21 explains that Part 4 is concerned with cases where a levy of 40 per cent of the assets of P is applied under Article 32 of the agreement. The paying agent provides a certificate to the appropriate person (the personal representatives or a beneficiary) which will specify the amount of cleared assets.
38.Paragraph 22 provides that the cleared assets are excluded from P’s estate with the result that no inheritance tax is payable on them. Clearance also applies to any associated ancillary charges.
39.Paragraphs 22(3) to 22(5) recognise that failure to include cleared assets in an account delivered to HMRC may result in too little inheritance tax being paid on other estate assets. The provisions ensure that despite assets being cleared, the liability on other assets is what it would have been had the cleared assets been taken into account. To avoid having to recalculate settled liabilities as far as possible, the cleared assets are treated as the top slice of the chargeable transfer. Where there is additional inheritance tax to pay there is also liability to associated interest and penalties.
40.Paragraph 23 gives effect to Article 32(6) of the agreement. It provides that the person delivering an account or further account under section 216 or 217 IHTA 1984 may elect to include the cleared assets. In that case clearance ceases to apply and instead credit is given for the amount of the levy against the inheritance tax due, with repayment if appropriate.
41.Paragraph 24 makes it explicit that the only circumstance in which the provision of a relevant certificate to HMRC entitles P to a repayment of any inheritance tax paid is as a result of an election under paragraph 23.