1 November 2012 by

EU Review, or should that be Revue?

On 24th October 2012 the European Commission announced that it had asked the UK Government to review the limited spouse exemption from inheritance tax which applies where a UK-domiciled person dies and assets pass to their non-UK domiciled spouse.

Click here for more information about domicile.

Ordinarily, spouses and civil partners are entirely exempt from UK inheritance tax on any assets they inherit from the other. However, where a person who is domiciled in the UK dies leaving a surviving spouse or civil partner who is domiciled outside the UK a limited exemption of £55,000 applies; anything over that figure may be subject to inheritance tax depending on other factors such as the availability of the nil-rate band, previous gifts made and whether any other reliefs (such as Business Property Relief) are available.

By way of example, on an estate worth £1,000,000 the tax due would be £248,000 (£1,000,000 less the nil-rate band of £325,000 less limited exemption of £55,000 x 40%).

The European Commission has now intervened as, on the face of it, the limited spouse exemption discriminates against nationals of other EU countries and is therefore contrary to Article 18 of the Treaty on the Functioning of the European Union. The UK Government has two months to respond, failing which the Commission may refer the matter to the European Court of Justice.

While it looks like steps are underway to remove or modify the limited spouse exemption, it is still very much the case that a non-UK domiciled spouse could find themselves with a whopping tax bill at a particularly vulnerable time. In addition, nationals of countries outside the EU may still be subject to the limited exemption regardless of any measures put in place to ensure EU nationals enjoy the same rights and benefits as UK nationals.

It is, therefore, still extremely important for spouses and civil partners where one or both of them are, or have been, domiciled outside the UK to properly structure their affairs and keep those arrangements under regular review.

If you think you may be affected by the limited spouse exemption or would like to discuss wills and tax planning in more detail please contact Iain Aitken.

9 October 2012 by

Nationwide – No Longer Interested

Nationwide Building Society has announced it will no longer offer mortgages on an interest-only basis. The rule change, effective from 11 October, is the latest move by mortgage lenders to ensure that borrowers are not taking on loans they cannot afford to repay.

10 October 2012 by

Collins guilty of harassment

Judge John Plumstead sentenced Collins to carry out 140 hours of unpaid community service over the next 18 months and ordered him to pay £3,500 in prosecution costs. He told Collins the service would be “humbling work” that would “make you pause and think about what you have done.” Collins is said to have shown no emotion as he was sentenced.

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