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Tony Tax
Tony Tax, Tax Consultant
Category: UK Tax
Satisfied Customers: 15902
Experience:  Inc Tax, CGT, Corp Tax, IHT, VAT.
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Customer Question

what do you need Tony?
Submitted: 1 year ago.
Category: UK Tax
Customer: replied 1 year ago.
Posted by JustAnswer at customer's request) Hello. I would like to request the following Expert Service(s) from you: Live Phone Call. Let me know if you need more information, or send me the service offer(s) so we can proceed.
Customer: replied 1 year ago.
My phone number is ***** (0) 1628 785056
Expert:  Tony Tax replied 1 year ago.

Hi.

Have you already asked a question? I cannot call until about 7pm this evening. Perhaps if you ask me your question, I can answer it in this dialogue.

Customer: replied 1 year ago.
via the pop up box. In summary, I am UK resident but lived and worked in France for many years. I have 4 "Assurance vie" contracts still in France that were taken out when I lived there. These are tax efficient investments for French nationals and tax residents to pass onto the next generation. Since I have now returned to the UK (and I have always had a UK passport, UK bank accounts, vote here, left here in the first place for work and will have my ashes scattered here I expect I will be treated as UK Domiciled for IHT purposes. As such my worldwide assets will be subject to 40% tax above the Nil rate band. My Question is "Do the French Assurance Vie" contracts fall inside or outside my taxable Estate?
Expert:  Tony Tax replied 1 year ago.

Let me take a look at that and I'll get back to you.

Customer: replied 1 year ago.
thank you
Customer: replied 1 year ago.
I have to go now. I look forward to hearing from you on this forum or via the phone at 7pm. I will be on my mobile 0788(###) ###-#### Many thanks
Expert:  Tony Tax replied 1 year ago.

Hi again.

The Assurance Vie policies can be included in your eatate for UK Inheritance Tax purposes.

My understanding is that these are treated as single premium investment bonds by HMRC in which case HS321 explains how gains are charged to income tax. You would get some relief from UK tax for the period of the gain covered by your non-UK residence. If the policy is regarded by HMRC as a personal portflio bond, then an annual chargeable event can occur on the growth within the policy as opposed to such a gain being triggered by an excess withdrawal on a single premium investment bond. As foreign insurance companies are obliged to report gains to HMRC if the policyholderlives in the UK, unless you have had a certificate from the company for an annual "growth gain" as opposed to a "withdrawal gain", then your policy is not a personal portfolio bond.

UK Inheritance Tax is charged on the deceased estate which benefits from a nil-rate band. The French version of IHT levies on the estate beneficiaries who each have an allowance based on their relationship to the deceased. As far as Inheritance Tax is concerned, if you are the named beneficiary of the policy and it pays out on your death, then the proceeds will form part of your estate for IHT purposes. If you assign the policy to someone else or have it written in trust for the benefit of a third party and it pays out to them on your death, then the proceeds will bypass your estate and not be subjected to IHT.

I hope this helps but let me know if you have any further questions.

Expert:  Tony Tax replied 1 year ago.

Hi.

I'm just following up to find out if my answer helped or if you have any further questions.

Customer: replied 1 year ago.
Tony,
Thank you for the above. I am aware how the gains are tax in my life time. It is the IHT I am asking about. You start off by saying they will be in my Estate and then talk later about "if you are the named beneficiary of the policy and it pays out on death, then the proceeds will form part of your Estate" The Assurance Vie policies are in my name but when I took these policies out I nominated my brother and nieces as beneficiaries, they are the named beneficiaries not me. Your two statements appear to contradict each other or am I reading this the wrong way?
Expert:  Tony Tax replied 1 year ago.

As you have named beneficiaries which are not you, then the payout on your death will bypass your estate for IHT purposes. Only if you were the named beneficiary would the payout on your death be part of your estate for IHT purposes.

Customer: replied 1 year ago.
IHT Free Assurance Vie even if I am UK domiciled? Sorry to Labour the point but this is a really important strand to my IHT planning. I have assets outside the Assurance Vie greater than £325,000 Are you prepared to put the fact that Assurance Vie is free of UK IHT for a UK Domiciled resident in writing as regulated advice?
Expert:  Tony Tax replied 1 year ago.

Nothing on here is regulated advice (just answer is a US company) but I'm British and I've been working in tax for 36 years. An Assurance Vie is treated no differently than an offshore (non UK) investment bond unless it is a personal portfolio bond in which case HMRC would have been informed by the French company of annual gains once you had returned to the UK.

In general, country A will not want to tax an investment from country B too differently from the way it is taxed in its country of origin (B) so far as is possible within the parameters of the tax laws of country A.

I never said that the policy you have was beyond the reach of UK IHT but that it will be if your estate is not the the named beneficiary of a payout on your death.

The policy you have is an investment plan, albeit a foreign one. They were born out a desire to avoid statutory succession rules in France. Where the person who took out the policy on their own life has had it written such that their estate will not receive the payout on their death, that payout will not form part of their estate for UK IHT purposes. This also applies to UK single premium investment bonds and to pension funds which have named beneficiaries to whom the money will pass directly on the bondholder's death or if the pension plan holder dies before they draw their pension. The notes here confirm that an Assurance Vie is cross border tax compliant:

http://www.expertsforexpats.com/expat-news-and-opinion/latest-expert-opinion/what-is-assurance-vie/

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