taxation 37


Availability of non-domiciled spouse exemption


The recent Finance Act has introduced some significant changes, writes Nadine Jayes, private client and tax solicitor, Blandy & Blandy LLP


These new rules, regarding the availability of spouse exemption in relation to transfers of assets from a UK domiciled spouse to their non-UK domiciled spouse, provide relief in a very specific set of circumstances and are a welcome extension to the availability of the relief which was previously very restrictive.


The basic position under UK Inheritance Tax (IHT) legislation is that an individual’s liability to IHT is based on their domicile status. If an individual has a UK domicile they will be subject to UK IHT on their worldwide estate. If, however, they do not have a UK domicile they will only be subject to UK IHT on their assets situated in the UK. Every person irrespective of their domicile is entitled to a tax free nil rate band, which is currently £325,000.


Where assets are transferred between spouses they are generally


exempt from IHT due to the availability of spouse exemption. There is one exception to this rule which is where assets are transferred from a UK domiciled spouse to their non-UK domiciled spouse. In such circumstances, until April 5, 2013, spouse exemption was limited to £55,000 only. The new rules make two significant changes to this position. Firstly, as from April 6, 2013 the £55,000 limit has been increased to the level of the nil rate band for IHT purposes. As before, any transfers above the limit will be either a potentially exempt transfer if made during lifetime, or a chargeable transfer if occurring on death.


The second and more significant change allows a non-domiciled spouse to elect to be UK domiciled. Once this election is made, unrestricted spouse exemption is available on gifts from the UK domiciled spouse. In order to


Beaufort ‘senses’ best options for entrepreneur


Richard Williams Beaufort Asset Management is proud to provide on- going advice to many local entrepreneurs on their financial endeavours


Whether it be on a new business investment, mortgage advice or careful tax planning, Beaufort’s advisers take a personal interest in each of their clients individual goals.


“Working with entrepreneurs always excites me,” says Mark Dolby, director at Beaufort Asset Management. “True entrepreneurs are a different breed, they have quite a unique outlook on risk taking and it’s always inspirational to work with people so determined to reach their business objectives.”


One entrepreneur that Dolby has particularly enjoyed working with over the past year is Richard Williams, owner-managing director of Sensor Solutions who are based in the Orchard Business Park in Kingsclere. He is only in his early


40s, but Williams has built his own business from scratch after leaving a now rival firm. He has grown the business at a controlled but impressive rate over the past eight years, creating what is now a very successful company. Sensor Solutions provides a technical engineering service for the aerospace, civil, marine and oil industries, offering a complete range of sensor services from consultation and manufacturing right through to analysis and testing.


Beaufort has recently advised Williams on his personal pension plans, carrying forward funds and unused allowances from his previous pension savings and investing them into a new pension which is going to give him a much


THE BUSINESS MAGAZINE – THAMES VALLEY – NOVEMBER 2013 Mark Dolby


better return for his retirement. Williams was previously advised on the amount of monies he could carry forward, however upon further investigation from Beaufort, he was actually able to go back over the past three years and use up all of the reliefs to maximise his pension fund, giving him a healthy sum to start his new pension.


Dolby is also advising William’s wife on her own pension matters and will be on hand to offer any further guidance on his next business venture and personal financial matters too. “The characteristics of a typical entrepreneur sometimes mean that they live for the now,


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make the election, the appropriate conditions must be met.


The election must be made in writing although there is no prescribed form. It is possible to specify the date on which the election takes effect but the date cannot be before April 6, 2103. In the absence of a specified date the legislation provides when the election takes effect. The provisions are flexible and it is possible to specify a date within seven years of the spouse’s death which enables failed potentially exempt transfers to be covered.


The election cannot be revoked once made. It will however cease to have effect once the person making it becomes non-UK resident for four successive tax years. This enables the impact of the election to be limited.


Although the election does achieve significant benefits there are a


and can overlook planning for their future retirement,” says Mark Dolby. “Richard, however understands the importance of making sure provisions are in place for the years to come and I am glad we have helped by maximising on the available allowances and giving him the best pension option available to him."


“I am incredibly happy with the advice and service I receive from Mark Dolby, and the team at Beaufort. I feel that my future finances are in great hands, which means I can get on with the running of my business," commented Williams.


Details: Mark Dolby 0118-9879400 mdolby@beaufortasset.com www.beaufortasset.com


number of disadvantages. The main downside to making the election is that once made the worldwide assets of the individual making the election will become subject to UK IHT. Additionally, any lifetime gifts which are made after the date of the election will potentially be bought within the UK IHT net. It is therefore important that careful consideration is given to all the circumstances before making the election and we would be happy to provide more specific advice.


Details: Nadine Jayes 0118-9516912 nadine.jayes@blandy.co.uk


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