inheritance tax whilst on OCI

[balaplus]

If I were to inherit property from my parents in India whilst on OCI, would I have to pay Inheritance tax in the UK?

Is the situation any different for PIO?

[Mafia]

The key issue for UK inheritance tax is your domicile rather than your immigration status. In most instances your domicile will be the country of your father's birth although it is a rebuttable presumption.

UK domiciled individuals are chargeable to inheritance tax on all their world-wide assets. Those not UK domiciled are chargeable to inheritance tax on their UK assets only.

Special rules are likely to deem non-UK domiciled individuals to be treated as UK domiciled, for inheritance tax purposes, if their residence amounts to at least seventeen complete tax years, out of the last twenty years or they were domiciled in the UK within three years of the transfer. The latter is essentially an anti-avoidance provision.

[JAJ]

As I understand it, UK Inheritance Tax is levied on the estate rather than the recipient. So a person in the UK inheriting from an Indian estate may not be liable for Inheritance Tax.

However it is important to check what the "base cost" for capital gains tax is, as this will affect CGT on any future disposal of the asset.

[Mafia]

There wouldn’t be any UK IHT payable on inheriting the asset from your parents. However the asset would now form part of your estate and if you are domiciled (or deemed to be domiciled) in the UK, it may be liable for IHT when you die.

Any IHT liability is based on probate value and any subsequent increase in value is irrelevant. If you were to sell the asset, CGT will, however, be chargeable on the difference between the selling price and probate value.