THE KNOWLEDGE See


STONE KING at the French


Property Exhibition Stand 19


property. However, the DTA allows the tax paid in France to be off set against the inheritance tax paid in the UK in respect of Peter’s French home.


BETTER, BEST Which inheritance tax system is ‘better’? For most people, ‘better’ will mean less tax payable. Therefore, whether the French or British inheritance tax system is going to be better will depend on how much you own, how many children you have, whether you were married, widowed or divorced, and who you want to leave your assets to. In the above examples, we


have discussed Peter. Having been widowed, and with an estate of approximately £2m, three children and one stepchild, the British system will result in less inheritance tax being payable on Peter’s death. This is because the British system does not diff erentiate between stepchildren and children in the same way that the French system does. However, if Peter were


divorced instead of widowed at the time of his death (meaning that his estate could only use one tax-free allowance, £500,000 instead of £1m) and had four children and no stepchildren, the situation changes. Applying these facts, considerably more tax would be payable in the UK compared to France. While it is not possible to


His children will each receive the fi rst €100,000 free of tax and will pay tax on a sliding scale on the balance between 5%-20% (given the amount that they are inheriting). By contrast, his stepchild will inherit only the fi rst €1,594 free of tax and will pay inheritance tax at the fl at rate of 60% on the balance. If a person dies domiciled


in France, then the French revenue will seek to tax their worldwide assets on their death. The defi nition of ‘domicile’ in France is diff erent to that of the UK and is closer to that of habitual residence.


DOUBLE TAXATION It is possible to be domiciled in both the UK and in France, because of the diff ering defi nitions of ‘domicile’. Therefore, a double taxation agreement (DTA) exists which will confi rm, depending on the deceased person’s circumstances, which country gets to tax which assets. One country will be entitled


to tax the worldwide assets and the other country will, broadly speaking, only be allowed to tax the assets located within that country. For example, Peter’s


permanent home was in the


UK but at the time of his death he also owned a home in France. Under the terms of the DTA, the UK is entitled to assess his worldwide assets for inheritance tax, and France only his French property. Because of the value of his


properties, Peter’s benefi ciaries must pay inheritance tax in both the UK and in France on the value of the French


make an explicit choice of one tax regime over another, where your assets are located and where you are domiciled will make a diff erence as to which tax regime will apply following your death, and the amount of tax payable by your benefi ciaries or estate. ■


Charlotte Macdonald works on the international and cross- border team at Stone King LLP Tel: 01225 337599 international@stoneking.co.uk


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