UK shareholdings, which are chargeable to UK inheritance tax (subject to any available exemptions), can be easily overlooked during the administration of cross border estates. UK shares are often held as part of larger investment portfolios which, particularly in the case of non-UK domiciled individuals, may be held within a nominee account of an offshore investment management company or bank. A common misconception is that a non UK domiciled, non UK resident individual holding shares in an offshore nominee account cannot have an exposure to UK inheritance tax. However, UK inheritance tax legislation looks through these ownership structures to the underlying shareholdings themselves.
Liability to UK inheritance tax is determined not only by the domicile of the individual but by the 'situs' of an asset. In the case of shares, their situs is usually the country where the register of shareholders is kept. Attention should therefore be paid to any shares with a 'GB' country code at the beginning of the International Securities Identification Number ('ISIN') as this indicates the issuing company is headquartered in Great Britain. The ISIN isn't always the end of the story but is a good indication of the situs of the shareholding for inheritance tax purposes.
Professional and lay executors of cross border estates should therefore conduct a review of any shareholdings held by the deceased (including those held within larger portfolios) to establish whether any fall within the UK inheritance tax net and then seek advice in relation to their UK reporting obligations. This is particularly important as executors can be held personally liable if they fail to submit an accurate account to H M Revenue & Customs and pay the corresponding tax liability.
A common misconception is that a non UK domiciled, non UK resident individual holding shares in an offshore nominee account cannot have an exposure to UK inheritance tax.