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Thank you for advising me to contact the Inheritance Tax team for advice. I looked at the web pages and it doesn't look like they will offer advice unless there has been a death and you are responsible for dealing with HMRC.
Are you sure that team will advise people who are simply trying to get information on how the Inheritance Tax will apply to a Canadian estate?
My question concerns inheritance tax. Here is my context.
I am a Canadian with British citizenship who, after a whole career in Canada, has retired to the UK as a permanent resident. I have no physical assets remaining in Canada. However, my investments are there: an RRSP, a Tax-Free Savings Account (TFSA) and a non-registered investment account managed by a Canadian advisor. I do not have non-dom status in the UK.
All my income comes from Canada (pension, dividends, capital gains, etc) and I pay all the tax owing to HMRC, not Canada.
I am now thinking of estate planning for my children in Canada and have questions about Inheritance Tax. I know it will be calculated on my worldwide assets. I have a home and an ISA here.
My Canadian financial advisor has said that, by naming my children as the beneficiaries of my two registered savings plans (RRSP and TFSA), the money in these accounts will fall outside my estate. (After Canada has taken the income tax owing on those registered accounts, the remainder will be paid directly to my children.) Only the money in my non-registered investment account will be assessed for Canadian estate taxation. He does not know how HMRC treats this situation.
I have read the Canada-UK treaty for the avoidance of double taxation but see no reference to the UK Inheritance Tax on Canadian assets.
Under UK Inheritance Tax law, will HMRC also exclude from my estate the monies paid to my children from my RRSP and TFSA after the Canadian income tax has been paid?
Or, will the UK determine the Inheritance Tax liability on the pre-tax amount in my Canadian estate? (This would result in double taxation.) Does the UK allow a tax credit to the amount of the Canadian income tax taken?
If HMRC has issued guidance to its officers about this situation, please could you provide a link to it? Or, write it in this forum?