UK

The transferor is primarily liable for the tax on any lifetime transfers which are chargeable when made.

The trustees of a settlement are liable for any tax arising from the transfer of settled property.

The transferee is primarily liable for any tax arising from a PET which becomes chargeable by reason of the death of the transferor.

The legal personal representatives are primarily liable for the tax attributable to property in the deceased's estate transferred by his will or intestacy or by survivorship.

Note:

Liability for tax on a transfer may rest with more than one person - for example, if tax payable on a transfer is not paid by the due date, it may be recovered from the transferee.

The main charge arises on transfers made by an individual on death, by will or intestacy, lifetime gifts made into trusts and other lifetime gifts made within seven years of death. There is no immediate charge made on outright lifetime gifts between individuals (and gifts into trusts for the disabled) and these become exempt from tax provided the transferor survives seven years from the date of the gift. During the seven‑year period these gifts are known as potentially exempt transfers (PETs). Special rules apply where property is given subject to a reservation (i.e. where the transferee does not enjoy it to the entire exclusion of the transferor). If the reservation ceases during the transferor's lifetime the gift is treated as a PET made by that person at that date. If the reservation continues until the transferor's death the property is treated for inheritance tax purposes as forming part of the transferor's estate at death.

The tax also applies to transfers by close companies. Special provisions govern the taxation of property held in settlement, which provide for a ten-yearly charge on the property held in trust as well a charge on assets taken out of the settlement.

All property in the United Kingdom is within the scope of inheritance tax, regardless of the domicile of the transferor; property outside the United Kingdom is also liable to the tax if the transferor is domiciled within the United Kingdom at the time of the transfer or if certain statutory rules impose a deemed United Kingdom domicile on the taxpayer. Settled property situated outside the United Kingdom is chargeable to tax if the settlor was domiciled in the United Kingdom at the time when the property was settled

The loss to the transferor is broadly the difference between the value of all the transferor's property immediately before the transfer and its value immediately after the transfer. Thus, if the transferor pays the tax, it is charged on the total of the gift and tax together. On death, the charge extends to the value of the deceased's estate..

Exemptions:

These include:

-the first GBP 55,000 of transfers from a spouse or civil partner domiciled (or deemed to be domiciled by the inheritance tax rules) in the United Kingdom to a spouse or civil partner domiciled outside the United Kingdom;

-full exemption for transfers between other spouses;

-the first GBP 3,000 of a transferor's total of gifts in a tax year;

-gifts a transferor makes to any transferee which in any tax year do not exceed GBP 250 per person;

-gifts out of income, provided certain conditions are fulfilled;

-certain dispositions for the maintenance of the family;

-certain government securities if the holder is not ordinarily resident in the United Kingdom;

-transfers to eligible charities, political parties, national institutions, and of land to eligible housing associations.

There are also heritage exemptions, conditional on certain undertakings being secured to maintain, preserve and provide reasonable public access to the property, for:

-buildings of outstanding historic or architectural interest (including surrounding land essential for the protection of the character and amenity of such buildings) and their historically associated contents;

-land of outstanding scenic, historic or scientific interest;

-objects which are of pre‑eminent national, scientific, historic or artistic interest;

-maintenance funds established to maintain and preserve certain heritage property.

Note

In his 2007 Pre-Budget Report, the Chancellor announced that from 9th October 2007, it will be possible for spouses and civil partners to transfer their nil-rate band allowances so that any part of the nil-rate band that was unused when the first spouse or civil partner died (for example, because one or more of the available IHT exemptions then applied) can be transferred to the individual's surviving spouse or civil partner for use on their death. Legislation on this proposal will be included in the 2008 Finance Bill.

Tax is, in most circumstances, due six months after the end of the month in which the taxable event occurred. However, tax on certain types of property (including, for example, houses, land, business assets and certain holdings of unquoted securities) may be paid by instalments over 10 years, in some cases, free from interest.

In other cases, interest is chargeable after a due date at a rate, currently 4%, which may vary from time to time.

HM Revenue and Customs

Reliefs:

These include:

-reliefs from the inheritance tax charge on qualifying agriculture, businesses, unquoted shares, woodlands and trusts for the benefit of employees;

-reliefs from the inheritance tax charge on death for any loss in value on sale of quoted securities and immovable property, within one year and four years respectively following the date of death;

-relief for taxpaying transfers occurring in quick succession;

-there is a measure of unilateral relief for tax paid in other countries in respect of the same transfer of property situated in that other country; relief from double taxation is also available where there is an appropriate double taxation convention