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Inheritance Canada/Uk

Inheritance Canada/Uk

Old Feb 6th 2022, 1:53 am
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Default Inheritance Canada/Uk

I have been told that despite being resident in Canada and a Canadian citizen that as I was born in the UK and am a dual national my estate will be subject to UK inheritance rules and taxes as well as Canadian.

Is this true? I can not find a local canadian lawyer who can answer this question.

If so do the UK rules apply to world wide assets or just those held in UK.

I understand that Canada assumes all assets are sold on death and the deceased pays taxes on capital gains in their last tax return before funds are passed to the estate and then estate tax is payable.

If UK death duties are payable as well how do the 2 processes work together?

Peter
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Old Feb 7th 2022, 1:26 pm
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Default Re: Inheritance Canada/Uk

Originally Posted by Ruutelpi
I have been told that despite being resident in Canada and a Canadian citizen that as I was born in the UK and am a dual national my estate will be subject to UK inheritance rules and taxes as well as Canadian.

Is this true? I can not find a local canadian lawyer who can answer this question.

If so do the UK rules apply to world wide assets or just those held in UK.

I understand that Canada assumes all assets are sold on death and the deceased pays taxes on capital gains in their last tax return before funds are passed to the estate and then estate tax is payable.

If UK death duties are payable as well how do the 2 processes work together?

Peter
Not quite.

If you are resident in Canada for tax rules then your estate will governed by the tax regime of Canada and the Province in which you are resident at the time of your death. However, if you hold any assets outside of that particular jurisdiction, those assets will be subject to any tax rules applicable to the jurisdiction in which they are held.
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Old Feb 7th 2022, 6:02 pm
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I agree, that was my first thought but then I was told to be careful as under UK law its not the country of residence that counts but the country of Domicile. When my father passed some 20 years ago, he was deemed to be domiciled in the UK because he had lived in the UK and was a British Citizen in the last 7 years prior to his death and was therefore subject to UK inheritance tax on his entire estate. I believe that this specific rule has now changed slightly in so far that if you were resident in the UK 3 years prior to death you are considered Domiciled in the UK and therefore your entire estate is subject to UK inheritance rules.

Additionally my concern is that elsewhere such as in rules regarding UK citizenship, income tax etc you are considered Domiciled in the UK simply for being born in the UK. So my question is along the following lines:
a) for inheritance purposes at what point are you no longer considered domiciled in the UK and therefore no longer subject to UK inheritance rules on your entire estate (excluding assets held in the UK)
b) if you are a UK citizen and were born in the UK and have some assets in the UK does this affect the rules above i.e. are you considered not to have broken ties with the UK as you have assets in the UK (and family) and therefore despite being resident outside the UK for more than 3 years you are still considered domiciled in UK for inheritance purposes (similar to the income tax rules for overseas employment)
c) are there any other circumstances which would cause you to be considered domiciled in the UK such as drawing a UK pension


From HMRC Q&A section BUT this does not appear to be the entire rule set regarding domicile. As previously stated if your are deemed domiciled in the UK your worldwide estate is subject to UK inheritance :

When you will not count as living abroad

HMRC will treat you as being domiciled in the UK if you either:
  • lived in the UK for 15 of the last 20 years
  • had your permanent home in the UK at any time in the last 3 years of your life

Last edited by christmasoompa; Feb 8th 2022 at 5:25 am.
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Old Feb 8th 2022, 3:23 pm
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Default Re: Inheritance Canada/Uk

What AC said.
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Old Feb 9th 2022, 8:50 am
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Default Re: Inheritance Canada/Uk

Same rules apply in Canada. Example, if you own property in Canada you will be taxed in Canada, even if you have moved and lived abroad.
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Old Mar 28th 2022, 9:58 pm
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Default Re: Inheritance Canada/Uk

It's a bit more complicated than that, I'm afraid, people are conflating residence, nationality and domicile which are all different things. You need to demonstrate that Canada is your domicile of Choice, that you have revoked the UK as your domicile of Origin (which is kind of the default if you were born in the UK) and have no intention of ever returning back to the UK. So if you are on an electoral register, draw a UK pension, have a holiday home or even a burial plot in the UK you may still be classed as domicile in the UK on your worldwide assets and your Canadian assets will be subject to IHT. HMRC will look at how all of your assets and intentions are structured as a whole. You really need to consult a specialist UK solicitor, a Canadian lawyer won't be able to help and there isn't enough information here for anyone to determine. The years you have spent out of the country are moot if your intentions never to return aren't demonstrated.

Your executors will not be able to sell or transfer UK assets such as shares, cash or property in your name without registering your death with the banks/registrars/Land Registry and running through Inheritance tax forms forms which prove all of your UK tax, namely income, Capital gains and inheritance tax are paid. Probate is then granted to Executors which allows them to distribute your estate when the HMRC are satisfied all these taxes are paid. This is likely to include scrutiny of your Domicile and anyone with International assets definitely gets flagged, especially for larger estates. HMRC will claw back IHT on your international assets including those in Canada if your domicile of Choice isn't in order. It's impossible to determine if you have non-dom status based on what you have said regarding your assets. Bear in mind that they IHT threshold is 325K GBP and can be passed between married couples to total 650k GBP, but if your total worldwide assets are more than that, it would be money well spent to get some advice from a UK lawyer specialising in domicile.
Good luck.
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Old Mar 29th 2022, 12:42 pm
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Default Re: Inheritance Canada/Uk

Thank you Slevers,
you are righrethe UK inheritance tax laws throw all normal concepts of residence out of the window and really only focus on domicile. The more I look into it the more complex it gets. Simply maintaining a bank account in the UK that you had before you left the UK or drawing a UK pensions even if you have not been back to the UK for 20 years could make you be deemed as domiciled in UK by the inland revenue and consequently your world wide assets would be subject to UK inheritance tax in addition to inheritence tax in your country of residence.

I have yet to find clarity or a solution to this issue as the official guidance provided by inland revenue on their website (you are not considered domiciled UK if lived outside UK for at least 15 of the 20 years prior to death and not owned a primary residence in UK in the 3 years prior to death) does not always apply.

Peter
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Old Apr 9th 2022, 11:38 pm
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Default Re: Inheritance Canada/Uk

Rishi Sunak's wife is non-dom and she lives in the UK and is the wife of the chancellor!
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