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Old 17.05.2015, 10:39
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Inheritance from the UK

Hi,
My partner's father (UK national/resident) died recently and the executers are in the final process of finalising the estate. In the UK, part of the estate will be liable for UK inheritance tax, and we believe, a small capital gains tax (on the difference between the value of the house in probate and the actual sale amount.) Background info only; we have advice on the UK tax situation.

From research (i.e. googling) it appears that there would be no Swiss / Vaud inheritance tax on my partner's share; nor would there be a CH/VD tax on the capital gain. However the entire value would be included in our fortune and subject to the Swiss tax for that. (This is regardless of if we keep the money in the UK or move it here).

We are both Swiss residents (Permis C) and subject to all taxes in the normal manner.

Do I have it right? Or have I overlooked or misunderstood something. Of course we will be consulting with a Swiss tax expert when we do our taxes, but I'd just like to confirm my understanding going into the process.
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Old 17.05.2015, 21:33
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Re: Inheritance from the UK

My understanding is that:

1) there is no capital gains tax on a single property in the UK that is a person's sole residence - so I am confused about the reference to CGT.

2) you would not be taxed twice - once in the UK and again here on the same thing. Anyway most cantons have no inheritance tax at present and will most likely reject the proposal to make it 20% on over CHF2 million. But the inherited estate will be subject to UK tax.

3) the inheritance will be added to your total wealth here and may be subject to taxation - but this is low at something 0.2% over your canton's prescribed limit...
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Old 17.05.2015, 22:15
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Re: Inheritance from the UK

You have got it right. IHT is imposed in the country or residence of the deceased and not in the country of residence of the person who inherits the property, so you will not have anything to pay here. Also since the property was the deceased's residence there could be, as you mentioned, a small capital gain's tax liability between probate and the sale of the property.
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Old 17.05.2015, 22:27
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Re: Inheritance from the UK

Quote:
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1) there is no capital gains tax on a single property in the UK that is a person's sole residence - so I am confused about the reference to CGT.
It's there in the OP: "a small capital gains tax (on the difference between the value of the house in probate and the actual sale amount.)"

Once a valuation has been determined for probate, the amount of IHT is determined. However, this also establishes the 'transfer value' to the inheritor. If the property is later sold for a higher value, the inheritor (or executor, depending whether or not the property was transferred yet) is liable for CGT on the difference. If the property was nominated as the primary residence, this can be avoided, but typically is not (as the executor or inheritor typically do not do this).

If the property is transferred to someone who is UK resident the above applies. If the property is transferred to someone who is non-UK resident, only the CGT on the gain since 1-Apr-2015 is liable (assuming the person is not liable for UK CGT, which I think requires he was non-resident for 5+ years).

It is sometimes possible (depending on circumstances) to have the will modified ('deed of variation' within 2 years of death) so that such assets are left solely to a non-resident, which helps minimise/avoid CGT. Of course you must also consider the rights/consent of other parties of the will.

Generally, you should consider the (avoidance of) double taxation treaty between UK and Switzerland. This is actually quite complicated and defines various rights to each country regarding the taxation that may be due.

As I understand it (which is not a lot...) the IHT taxation in the UK is generally on the deceased's estate, whereas in Switzerland it is on the inheritor (i.e. your partner). Depending on the treaty, you may or may not be taxed in both regards. Regarding CGT, I think you are free from this in Switzerland on non-Swiss real estate.

Whatever value you inherit, of course will count towards your 'wealth'.
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Old 18.05.2015, 12:15
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Re: Inheritance from the UK

jaudi,
Thanks for clarifying for others. The value decided on by the executers for probate was, we thought, just a little bit high - given the UK market for single family houses. But we agreed, and it was accepted by the probate authorities. When the house went on the market we actually had a bidding war going on with two couples determined to succeed, so the final sale price is higher than even the executers expected.

Good news that the Swiss won't assess CGT on the final sale of non-Swiss property. We're a little uncertain about in the UK, as two siblings - one UK resident and one Swiss resident, will achieve the gain.
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