ACCA ATX ^UK Syllabus A3. Inheritance Tax - Double tax relief for inheritance tax - Notes ^{6 / 7}

This means

that IHT is payable in the UK on these overseas assets and possibly death duties were paid overseas as well (two lots of tax (double)).

• When this is the case the individual is allowed to reduce the UK IHT payable on these assets by something called Double Tax Relief (DTR)

Calculation of DTR:

This is the lower of:

1. The foreign tax suffered

2. UK IHT on the overseas asset

Calculation of the UK IHT on the overseas asset:

Estate rate * Value of the foreign asset

• Estate rate: IHT on the estate after QSR/Gross chargeable estate value

Note:

Remember from valuation of assets for IHT that the value of a foreign asset is the value after deducting any additional expenses incurred in realising or managing the property (which may be subject to a maximum of 5%)

• Also, DTR is deducted after QSR.

Illustration:

Prem died on 15/08/2024 leaving an estate valued at £375,000. 

The estate included property situated overseas valued at £60,000. 

Overseas IHT of £18,000 was paid on this property. 

No lifetime transfers have been made and he left his entire estate to his son.

• How much IHT is payable on death?

Solution:

IHT Payable
Gross chargeable estate value £375,000

Less:
NRB (£325,000)
Taxable amount £50,000
IHT 40%*£50,000 = £20,000
Less DTR (W1) (£3,200)
IHT payable £16,800

W1

DTR is the lower of:

1. Overseas IHT suffered £18,000

2. UK IHT payable = £60,000 * £20,000/£375,000 = £3,200