Taxation and revenue collection is a universal phenomenon. Governments collect taxes from their citizens in order to provide law and order, education and health facilities. Tax money is also used in the development of a country. Simply put, governments run on tax money and a timely payment of taxes is a legal duty of the citizens. Any delay in this regard is a federal offence.
In some countries, one can face years of hard labour in jail while others are imposed heavy fines on tax evasion. In the United Kingdom, the government imposes a number of taxes on its citizens. Inheritance-tax is one of these taxes that are not present in some other countries. This phenomenon along with complexities involved in the collection of inheritance-tax has given rise to many questions.
Inheritance-tax in the UK is levied on those persons who inherit properties, monetary assets, houses and agricultural estates with an aggregate worth of â,¤325,000 or more. Inheritance-tax is levied on those assets that are transferred to immediate survivors of a dead person. Similarly, a dying person can nominate any person to become a beneficiary and sole owner of his property. This is done through a will that clearly mentions the shares in property and administrative duties, among other things.
Inheritance-tax is not applicable on persons who lived out of UK for duration of more than three years during a 20-year tax period. Similarly, British people with overseas assets are not charged with any inheritance-tax. If a person has transferred a property to a person, seven years before his death then the beneficiary will not be liable for paying any inheritance tax.
Otherwise, any person receiving a property from a deceased person will have to pay inheritance tax. Life insurance policies for children are also exempt from deducting inheritance tax. Additionally, transfer of assets to spouses and civil partners are also exempt from paying inheritance tax.
Apart from these exemptions, every other property transferred after the death of the nominee is eligible for inheritance tax. In most cases, the beneficiary has to pay as high as 40% of the total value of the transferred property or assets. The amount is due within six months after the transfer of property.
During this time, the government will not impose any interest rates on the due amount. Any delay of more than six months, however, can result in an interest rate of 2.5% that will be accrued on the payable amount. Even if the beneficiary does not pay that amount, the government reserves the right to take the case to a court and arrest the person on charges of tax evasion.
Inheritance tax has become an integral part of UK legal and taxation system. Still, many people are not eager to adopt it fully and courts see a large number of cases related to inheritance law and its complications. The government is undertaking a reform process in this regard and changes are expected in the recent future.
Simon P Jenning