Q&A: Where do I pay inheritance tax from my deceased Irish uncle?

Where you pay tax is determined by where either of you is based

Under Irish capital acquisitions tax, an inheritance is taxable in the Republic if the person who has died was resident in Ireland for tax purposes. Photograph: iStock

Under Irish capital acquisitions tax, an inheritance is taxable in the Republic if the person who has died was resident in Ireland for tax purposes. Photograph: iStock

 

Could you tell me, where do I pay inheritance tax from my deceased uncle? I live in Northern Ireland and the solicitor dealing with the estate has asked for my ceased PPS number.

Do I pay in the UK or Republic of Ireland and is the tax self-assessed? There are no taxes due to Irish Revenue from me. The solicitor states he’ll be charging €300 for dealing with the UK. Is it usual to ask a probate solicitor to provide an interim bill for work done to date?

Ms TG, email

Taxation across borders is always an area fraught with difficulty and, for most ordinary people, it is not something they generally come across. Because of our Border and also because of the international mobility of our population, it is an area that tends to affect Irish people more than most.

When it comes to the UK, the situation can be more confusing because the two jurisdictions operate entirely contradictory regimes on inheritance tax. Over here, it is the beneficiaries who are assessed and can be liable for tax; in the UK, the tax is levied on the estate where it is large enough to exceed the exemption threshold.

Countries generally have rules determining where the tax is paid with many also having double taxation agreements to ensure that when both jurisdictions have taxing powers, people are not taxed twice on the same money, often by receiving a credit in one jurisdiction for any tax paid in the other.

You say nothing about the size of your uncle’s estate or, indeed, how much he has left you but you will be able to work things out from the general rules applying.

Under Irish capital acquisitions tax, which is the tax code governing inheritance and gifts in the Republic, an inheritance is taxable in the Republic if the person who has died was resident in Ireland for tax purposes, if the person receiving the inheritance is resident here, or if the property involved is based here.

If any one of those applies, the Irish Revenue Commissioners will have jurisdiction.

In this case, your uncle was resident here so that means you will be liable to Irish inheritance tax, even though you are resident in the UK.

Exemption

There is a tax free exemption on inheritances but it can be one of three figures, depending on the relationship between the deceased and the beneficiary. In your case, as a niece, you will fall into category B, where there is an exemption from tax for the first €32,500 you receive.

The catch here is that if you have previously received a gift over the sum of €3,000 or an inheritance from a grandparent, uncle/aunt or sibling tax resident in the Republic, that will be deducted from the exemption as it is a lifetime exemption covering gifts and inheritances from any of those people.

Anyway, assuming you have not previously benefited, you pay no tax on the first €32,500 in value of any inheritance from your uncle: you will pay tax to Revenue at 33 per cent on the balance.

As to the rest, I am a little puzzled. You mention a ceased PPS number. This is akin to the National Insurance number in the UK and is required for access to welfare payments. And like a National Insurance number, it doesn’t cease or expire.

It is a unique identifier that is allocated to you, and only to you. It may not be relevant to you right now but, as long as you initially had one, it will still operate should you ever return to the Republic.

In this case, it is also required for the Statement of Affairs (Probate) Form SA2 that the executor of your uncle’s estate will have to file with Revenue. The executor is required to give details of all beneficiaries under the estate, including their PPS numbers.

You’ll also need it when you file your own IT38 inheritance tax return to the Irish tax authorities as you will have to do to settle any tax liability you have on this estate. And yes, it is self-assessed but, naturally, you can expect it will be cross referenced with the SA2 form the executor filed.

You say you have no taxes due to Revenue. I am not sure this is in general or specific to this legacy. If you are saying the legacy is below the €32,500 threshold, fair enough, but if it is more than 80 per cent of that amount – ie €26,000 – you still need to file with Revenue even though no tax is due.

Finally, in relation to the solicitor, I’m not sure what the arrangements are for charging a beneficiary a sum because they are living in a different jurisdiction. It sounds feasible even if I cannot see why it is justified in this case. Normally, any legal costs are charged to the estate rather that against individual beneficiaries. I would certainly ask for clarity on why you are being charged to take an inheritance, and why such a charge is not a normal legal cost against the estate if it is valid.

It is not unusual to seek an interim bill from a solicitor in relation to probate but only if the whole thing is dragging. In any case, any request for such a reckoning would come from the executor, not a beneficiary.

Please send your queries to Dominic Coyle, Q&A, The Irish Times, 24-28 Tara Street, Dublin 2, or email dcoyle@irishtimes.com. This column is a reader service and is not intended to replace professional advice. No personal correspondence will be entered into

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