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Must I pay French inheritance tax on a UK legacy?

We look at whether it is possible to be taxed twice when residents of France inherit assets in the UK 

We look at whether it is possible to be taxed twice when residents of France inherit assets in the UK Pic: Kaspars Grinvalds / Shutterstock

Reader Question: What are the rules regarding foreign inheritances and tax? My husband is due to inherit some money for which probate will have been paid to the UK government. If we transfer some of it to our French account would we have to pay tax again in France? We live in France

The UK has a nil rate inheritance tax band for an estate with a value of up to £325,000, although this threshold can increase depending on the testator’s relation with the person to whom they leave their assets. 

If the deceased person has made lifetime gifts in the seven years before they die, the £325,000 will also be reduced. 

Beyond the nil rate band the remaining estate is taxed at 40%. This is paid before the assets are distributed, in contrast to French inheritance tax, which is paid by the beneficiaries. 

If you are a French resident for tax purposes, you are assessed on your worldwide income, so might assume that a UK inheritance would be taxable in France. 

However, as a result of the 1963 Estate Double Taxation Treaty, inheritances from a UK-based person, of UK-based assets can only be taxed in the UK, so once UK inheritance tax (IHT) has been deducted there will be nothing further to pay. You cannot be taxed twice.

The position is, however, different if the deceased person also had French assets. In this case that portion of the estate could also be subject to French succession tax. The most common situation in which this would apply would be a UK resident who dies leaving a French holiday home.

In this case, however, the UK should allow a tax credit against the recipient’s share of UK inheritance tax, up to the amount of French inheritance tax.

The Double Taxation Treaty only relates to inheritance, and not to lifetime gifts.

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