Q. How does the UK ten-year IHT nonresidence rule work?
A. I want to emigrate to an inheritance tax (IHT)-free country. However, I have a considerable estate. I realise that after ten years of non-residence, I would not be liable to UK IHT on my non-UK assets. But it is not clear (at least to me) if the ten-year rule relates to ten complete tax years of non-residence, or is it ten years from the date that I became non-resident? I also have UK properties with large gains. I understand I can sell these once I am non-resident, with an uplift in the properties’ values to April 2015 or April 2019, depending upon whether the properties are residential or commercial. This would obviously reduce the UK capital gains tax (CGT) significantly. Am I correct in my assumptions?
Arthur Weller replies:
On the inheritance tax (IHT) issue, with regard to the ten year period, it is ten tax years, not ten years from the date you become non-UK resident (see HMRC’s Inheritance Tax Manual at IHTM47020). With regard to the capital gains tax (CGT) issue, in case you decide to return to the UK, it makes a difference whether you return after being five years non-UK resident, or return within the first five years. Additionally, if you decide to sell shares in a ‘property-rich’ company, this will be treated in a similar way to selling UK property directly: see HMRC’s Capital Gains Manual at CG73930P.
