Inheritance tax and your domicile of origin

Q My father died in February and we are now trying to get though probate. He had returned to the UK from Italy, where he was living with my mother and myself, to MOT his car.

My mother says we have to pay a huge amount of inheritance tax. But I don't understand why we have to pay it when we live in Italy, where my father had all his assets.

Also, the estate is split evenly between my mother and me so we should be below the limit to pay the tax.

EC

A Payment of inheritance tax (IHT) is dependent on where you are domiciled, not where you live. Every person is born with a domicile of origin, which is inherited from one of the parents. Even if you were born in Italy, for example, your domicile would be England, as that appears to be your father's domicile. Now that your father has died, you will inherit the domicile of your mother.

You can, however, choose to change your domicile if you move to another country and plan to live there for the rest of your life. No formal arrangement is necessary - this is not the same as changing your citizenship or nationality.

But if there is any dispute with the Inland Revenue over IHT, the courts have to decide where the deceased's domicile actually lies. It will determine this by looking at how long the person was living in another country, where his or her family lives, where the bulk of his or her assets are held, and so on.

You don't say how long your family has been living in Italy or explain why your father's car was still registered in the UK, but any of these factors could indicate that your father's domicile is still England.

IHT is payable at 40% on any part of a deceased person's estate above ?242,000, though the part of the estate inherited by your mother is exempt, provided her domicile is still the UK.