Liability to UK inheritance tax ('IHT') is dependent on the individual's domicile at the time of the transfer. If an individual is not domiciled in the UK IHT applies only to their UK assets.

In the UK, subject to any contrary provision in a Double Taxation Treaty,the common law rule in relation to immovable property is that the laws of the country where the asset is situated apply and this determines the 'situs' of property for taxation purposes. For example, rights or interests in or over immovable property and chattels are governed by the jurisdiction in which the property is located and for registered shares and securities it is a matter of where the register is kept.

The significance of identifying the situ of assets can be illustrated by an Estate we recently administered where a substantial proportion of the non UK domiciled deceased's holdings could be considered to be non-situs assets because the registers for the holdings were kept outside of the UK. The holdings were therefore exempt from UK IHT. Our claim for the non-situs assets to be treated as exempt resulted in a substantial IHT saving to the UK estate.

It is also important to bear in mind that a full Transferable Nil Rate Band may also be claimed from the estate of a non-domiciled spouse in the same way as usual which could also provide a significant IHT saving.