ACCA Advanced Taxation (ATX) Practice Exam

What election can a non-UK domiciled spouse make for inheritance tax (IHT) purposes?

1. Elect to be treated as any foreign entity

2. Be exempted from all IHT

3. Be treated as UK domiciled

4. Receive a reduced tax rate

The correct answer is: Be treated as UK domiciled

A non-UK domiciled spouse can elect to be treated as UK domiciled for inheritance tax (IHT) purposes. This election allows the non-UK domiciled spouse to be treated in the same manner as a UK domiciled individual when it comes to the IHT implications on their estate. By making this election, the non-UK domiciled spouse becomes subject to UK IHT on their worldwide assets, just like UK domiciliaries. This election is particularly relevant because it affects how the estate is taxed, potentially leading to tax benefits or liabilities depending on the nature and location of the assets held by the non-UK domiciled individual. It is important for individuals in these situations to consider their overall financial position and future estate planning needs when deciding whether to opt for such an election. Other options do not accurately represent the implications or choices available to a non-UK domiciled spouse for IHT purposes. For instance, being exempted from all IHT or receiving a reduced tax rate does not align with the regulations governing inheritance tax; instead, the election provides a framework for how the tax obligations are determined in reference to domicile status.