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US / UK share - estate duty / IHT

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  1. #1

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    US / UK share - estate duty / IHT

    As many of you know I've been doing quite a bit of research into investments etc after my IFA fiasco.

    I've now got some shares in the US market, mainly with Vanguard ETFs and the aim is to top up every month.

    I've at the same time got some funds open up in the UK (again Vanguard funds) through iii.

    Next thing I'm now looking into is Estate Duty (US) and IHT.

    Seems in the US, if you have US listed shares which have underlying assets in the US (and this would probably include any S&P 500 ETF) you will get whacked with estate duty of 40% after US$60k of assets.

    In the UK the IHT is GBP325k.

    Also both in the US and UK need to consider withholding taxes and capital gains in the UK upon a sale.

    There is the Vanguard HK S&P 500 ETF, but as has been previously discussed here, its probably not a great stock to own due to liquidity.


  2. #2

    Estate duty in the UK depends on your status and that of the person inheriting.

    If you are British and your spouse has the right of abode in the UK then there is no inheritance tax on stuff that you leave to them. If you are British and your spouse does not have right of abode in the UK then the UK Inland Revenue will come after your estate for IHT on the entire value (not just assets held in the UK). I know British Citizens who have renounced and naturalised in HK to avoid this tax.


  3. #3

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    Quote Originally Posted by dentarthurdent:
    Estate duty in the UK depends on your status and that of the person inheriting.

    If you are British and your spouse has the right of abode in the UK then there is no inheritance tax on stuff that you leave to them. If you are British and your spouse does not have right of abode in the UK then the UK Inland Revenue will come after your estate for IHT on the entire value (not just assets held in the UK). I know British Citizens who have renounced and naturalised in HK to avoid this tax.
    If you are UK non-resident, then its only your UK assets that IHT is charged.

  4. #4

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    Original Post Deleted
    - I am just starting to look into this, but I think its quite important, esp if you have significant holdings in US and UK assets.

    I haven't quite figured it out yet and am looking at various options to minimise IHT / Estate Duty /capital gains taxes / withholding taxes.

    Re withholding taxes in UK stock, that is on the dividend, not on the sale.

    What I'm wondering is if I bought UK shares on IB platform, would there be any cap gains tax on a sale. I don't think so.

    I'm looking at opening an account with Internaxx | Active investing and financial services for global citizens which is based out of Luxembourg (it was previously TD International). They do have a fair few funds on their platform, but not as big as say iii, but they are "offshore" so tax advantageous.

    I am also contemplating speaking to AES International out of Dubai, but am very very very very wary about dealing with another IFA. These guys from what I understand don't sell you the FPI, OMI style wrappers but they do charge a 1.25% management fee, but if they can help me reduce my potential tax liabilities.

    Re setting up a company for trading. Might look into that.

  5. #5
    Quote Originally Posted by pin:
    If you are UK non-resident, then its only your UK assets that IHT is charged.
    If you are a UK citizen then that is simply not true. UK IHT is based on Domicile, not residence, and the UK IR's presumption is that UK citizens are domiciled there unless there is overwhelming evidence to the contrary. Having PR somewhere else isn't sufficient. Friends with no UK assets who have investigated this in detail have decided to renounce their UK citizenship as a result. If you are a UK citizen and thinking about where your assets go when you die then I strongly suggest you look into this in more detail and get professional advice. DeletedUser's note about trust structures is one (expensive, for advisors etc) way to go. Giving up British Citizenship is another much cheaper way.

    Personally my approach is to aim to spend my last dollar on the day I die!
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  6. #6

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    Quote Originally Posted by dentarthurdent:
    If you are a UK citizen then that is simply not true. UK IHT is based on Domicile, not residence, and the UK IR's presumption is that UK citizens are domiciled there unless there is overwhelming evidence to the contrary. Having PR somewhere else isn't sufficient. Friends with no UK assets who have investigated this in detail have decided to renounce their UK citizenship as a result. If you are a UK citizen and thinking about where your assets go when you die then I strongly suggest you look into this in more detail and get professional advice. DeletedUser's note about trust structures is one (expensive, for advisors etc) way to go. Giving up British Citizenship is another much cheaper way.
    Yes, sorry, domicile not residence.

    https://www.gov.uk/inheritance-tax/w...de-the-uk-dies

    I think I will be fine meeting this definition.

  7. #7
    Original Post Deleted
    To be honest I've never looked at that. The bad case is a UK citizen leaving all to their spouse who does not have right of abode in the UK - then the entire estate is taxed.
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  8. #8
    Quote Originally Posted by pin:
    I think I will be fine meeting this definition.
    Domicile is a very loose legal term. A good friend of mine, who left the UK 30 years ago, is reasonably wealthy (I guess maybe HK$30M net worth), who has no assets or family there, and who is married to a Hongkonger with no right of abode in the UK recently spent a lot of time studying this and getting advice, and as a result he decided to naturalize as a HK citizen.

    But he is 67 and the course of the rest of his life is fairly clear. I understand that if you are much younger then you might want to retain the options of a British passport. However, bear in mind that if you give up British citizenship for the purposes of acquiring another one then, under current British laws, once in your life, you can get it back, no questions asked. So you still have a safety net if the shit really hits the fan. (Although with Brexit the safety net is looking a bit ragged these days!)

  9. #9

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    Quote Originally Posted by dentarthurdent:
    Domicile is a very loose legal term. A good friend of mine, who left the UK 30 years ago, is reasonably wealthy (I guess maybe HK$30M net worth), who has no assets or family there, and who is married to a Hongkonger with no right of abode in the UK recently spent a lot of time studying this and getting advice, and as a result he decided to naturalize as a HK citizen.

    But he is 67 and the course of the rest of his life is fairly clear. I understand that if you are much younger then you might want to retain the options of a British passport. However, bear in mind that if you give up British citizenship for the purposes of acquiring another one then, under current British laws, once in your life, you can get it back, no questions asked. So you still have a safety net if the shit really hits the fan. (Although with Brexit the safety net is looking a bit ragged these days!)
    I should clarify, based on present UK laws I know I am not UK domiciled at present.

    Circumstances may obviously change in the future.

  10. #10
    Quote Originally Posted by pin:
    I should clarify, based on present UK laws I know I am not UK domiciled at present.
    (Assuming you are a British Citizen) I wish your widow good luck arguing that when the taxman arrives (unless you are one of the few people who have managed to get a definitive opinion from them on your domicile)!
    Last edited by dentarthurdent; 20-08-2017 at 05:23 PM.
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