This is both a resource – for individuals and their advisers re ‘UK India Tax Treaty IHT Planning’ – a high-level guide
Case Study
Our client was an ultra-high net worth Indian citizen but who had been residing in the UK for a few decades; so he and his wife were ‘deemed UK domiciled’ individuals for UK tax purposes at the time. They explored and undertook this UK India Tax Treaty IHT planning; they became confident of their domicile status, and their worldwide estates became significantly less exposed to UK IHT which stands at 40%!
While our client was still actively involved in the operations and strategy of his UK business, his children were married abroad and had their own young families. Given the senior age of our client and his wife, they were introduced to us by their family office, to seek specialist IHT planning tax advice in this scenario i.e. UK and Indian domicile status.
Many qualify for the UK India tax treaty IHT planning but don’t seem to get round to securing it soon enough. Doing so ensures one can make further changes to their lives, to ensure their ties and connections to India are even stronger, and withstand a future challenge from HMRC.
What does UK India Tax Treaty planning look like?
We reviewed our client’s worldwide estate which included shares/interests in various trading entities around the world, and passive investments like real-estate, financial assets and holiday homes. While the shares in his trading companies would have qualified for Business Property Relief (subject to new limits) anyway and historic non-UK Trusts were outside of his estate given he was only the settlor, he was extremely worried about the large UK IHT exposure on other non-qualifying assets like directly owned real-estate and financial investments (which were mainly based abroad).
Bearing in mind that our client had retained his Indian passport despite the fact that he had been residing in the UK for decades and also, he continued to maintain (and grew) close family, social, cultural, charitable and professional ties with India. These were strengthened by his regular trips there.
We assisted him in comprehensively exploring and documenting:
- his background/history/the facts regarding India,
- his current activities and business interests in both places,
- his family and social connections in both places, and
- his intentions for living in India more permanently.
What is included in the the UK India tax treaty advice?
Our focus is on looking at those facts and intentions through the UK India tax treaty IHT planning lens:
- Explaining how UK IHT operates on worldwide assets for UK domiciled, newly UK ‘deemed domiciled’ individuals and long-term residents (from 6 April 2025);
- Explaining the UK IHT planning opportunities afforded by the UK India Tax Treaty: the Double Taxation Relief (Estate Duty) (India) Order 1956 (SI 1956/998), where estate taxes have long been abolished in India (since 1985). We covered the fact that the UK deemed domicile rule may be ignored so that non-UK situs assets pass under a non-UK Will, when an individual is still/also domiciled in India under general law;
- Providing our professional tax opinion re his up-to-date domicile status under general law. Our comprehensive written tax advice was drafted after considering many relevant contemporaneous records, demonstrating the volume and strength of our client’s connections to India – his forever home.
- We also recommended additional actions to be taken, to maintain that supporting evidence and connection – which is most important in UK India Tax Treaty IHT planning;
- We introduced him to qualified lawyers in the UK to draft a UK Will through which the UK situs assets are to be passed; and
- We introduced him to qualified lawyers in India, who drafted an Indian/ROW (Rest of World) Will, through which all non-UK situs assets were to be passed.
What is the benefit of UK India Tax Treaty planning?
Through our experience and knowledge of the UK India Tax Treaty and utilising it as part of our tax advice and planning, our client should (subject to any material changes) be able to pass on his non-UK assets / wealth (built over his long and successful career/life). He will do this while complying with both UK IHT rules and Estate Duty rules in India.
Since there is no IHT/estate duty or equivalent in India, those non-UK assets can be left to his family in full, free of any UK IHT charge. Through implementing this bespoke IHT planning, our client and his family are protecting a substantial part of his hard earned wealth from being lost / taxed at 40% here.
For the benefit of the reader, in addition to India, the UK has only three similar IHT tax treaties, with: Pakistan, Italy and France.
We continue to act for the client and his family on a wide range of UK and international matters and specific projects. Also, the client has introduced us to his friends who similarly needed UK India Tax Treaty IHT planning tax advice.
For non-UK domiciled residents in the UK, or now Long-Term Residents, we strongly recommend seeking professional UK India IHT planning advice, where they have strong connections to India, Pakistan, Italy or France. For a detailed review of the UK India tax treaty, please see HMRC’s published versions, from the original one, modified/updated versions, through to the synthesised versions here: India: tax treaties – GOV.UK
Please note that this case study reflects the facts, circumstances and tax position at the time the project was undertaken. It has not been updated for any subsequent change in tax law or practice and must not be construed as advice, or otherwise relied upon for any purpose.
HOW CAN PURE TAX HELP?
At Pure Tax our Tax Investigation & Disclosure specialists are industry recognised and have dealt with hundreds of contentious situations with HMRC over the years. We are adept at managing interactions with the tax authorities to ensure that the investigation and disclosure processes run smoothly and that your interests are best protected.
We don’t offer tax compliance services and we don’t offer all private client advisory services. However, the focused tax advisory services we do provide are second to none. From our experience and mixed expertise, we deliver UK India Tax Treaty IHT planning meticulously.
