Section 178: Transfer to Spouse Or Civil Partner Not Domiciled in United Kingdom
Summary
1.Section 178 increases the lifetime limit on transfers from one UK domiciled spouse or civil partner to another domiciled elsewhere that are exempt from inheritance tax (IHT).
Details of the Section
2.Subsection (2) amends section 18(2) of Inheritance Tax Act 1984 (IHTA), altering the amount that can be transferred on an IHT-exempt basis from an individual who is domiciled in the UK to a spouse or civil partner who is domiciled elsewhere from its existing level of £55,000 to an amount defined by reference to the prevailing IHT exemption limit at the time of the transfer.
3.Subsection (3) adds a new subsection 2A to section 18 IHTA. New subsection 2A provides that for the purposes of subsection 2, the exemption limit is defined by reference to the table of rates of tax in Schedule 1 IHTA.
Background
4.IHT charge is based on domicile status. UK-domiciles pay IHT on their worldwide assets, whereas non-domiciles only pay IHT on their UK assets
5.Transfers between spouses and civil partners, whether gifts made during a person’s lifetime or transfers on the death of one of the couple, are generally exempt from IHT.
6.Where the spouse or civil partner to whom assets are transferred does not have a UK domicile, transfers are capped at £55,000. This cap is intended to address the risk that an individual whose domicile is outside of the UK, could remove assets abroad following an IHT-exempt transfer from their UK-domiciled spouse or civil partner to escape any IHT on their subsequent disposal.
