Latest Posts

Buried Treasure? HMRC Is Hunting for Hidden Cryptoassets

Following recent developments, HMRC will soon have access to information on many cryptoasset holdings, and is taking the opportunity to issue a reminder that these need to be reported as part of taxable estates.

A letter from HMRC

HMRC recently sent a letter to professionals who have previously submitted Inheritance Tax returns, reminding them that cryptoassets are subject to Inheritance Tax (IHT). The letter instructs recipients to check whether estates include cryptoassets, and to make sure they are reported to HMRC as part of a return. Where submitted returns have failed to mention a cryptoasset belonging to the deceased, HMRC point out that this must be amended.

When are cryptoassets subject to IHT?

Under the rules that apply to deaths since 6 April 2025, IHT is charged on all assets of a person who dies as a Long Term Resident of the UK, which means they have spent at least 10 of the last 20 years as a UK tax resident. (A year of residence for these purposes is determined by the UK’s Statutory Residence Test.) Those who are not Long Term Residents will only be subject to IHT on their assets located in the UK.

Of course, this rule is not so straightforward to apply to decentralised cryptoassets, which can’t really be said to have a ‘location’ in any meaningful sense. There are various different arguments that can be made for how their legal location can be identified in English law. HMRC have advanced their own theory (albeit one without much legal basis or support from professionals or academics) that this is based on the residence of the beneficial owner of the cryptoasset.

This can lead to some surprising results. Imagine an Italian with cryptoassets held by a Swiss custodian, who decides to spend a few years in the UK. She has been advised that her foreign assets are not subject to IHT until she has spent at least 10 years in the UK, and so assumes that her cryptoassets are currently exempt from IHT. However, if she dies two years after arriving in the UK, HMRC would take the view that because she was UK resident, the cryptoassets are UK assets, and therefore subject to IHT. Of course, had she been properly advised, our Italian cryptoholder would ideally have undertaken pre-arrival planning to mitigate this potential exposure to IHT.

The CARF

At first glance, it is not obvious what has prompted this reminder from HMRC, since the law on this point has not changed. As HMRC point out, while there is no specific reference to cryptoassets in IHT legislation, the wording in the Inheritance Tax Act 1985 is certainly broad enough to apply to cryptoassets.

Perhaps the reason for this letter is the introduction at the start of this year of the Crypto-Asset Reporting Framework (CARF) in many jurisdictions, including the UK. The CARF is an international agreement for information sharing, similar in some ways to the Common Reporting Standard (CRS). The idea behind the CARF is that cryptoasset service providers (such as exchanges, for example) will be obliged to identify their customers and collect certain information about their activities (for example, sales and purchases of cryptoassets) so that this can be shared with the tax authorities wherever the customer is resident.

This additional transparency may bring unwelcome surprises for those who have either assumed that they did not have to pay tax on cryptoassets, or believed HMRC would never find out. If the CARF data suggests a person had been selling cryptoassets at a gain, and they failed to report that gain to HMRC, it is likely that HMRC will have further questions. Similarly, if HMRC knows from CARF that a person was investing in cryptoassets, and their personal representatives submit an IHT account that fails to disclose these, we expect that HMRC will get in touch.

Difficulties identifying cryptoassets

Of course, it’s one thing to know that cryptoassets need to be declared for IHT purposes, and quite another for personal representatives to know whether a deceased person owned them, or indeed find out the quantities and types of token that were owned. If the deceased did not leave accessible records, it may be difficult if not impossible to identify their cryptoassets. It’s easy to imagine that in many cases, a CARF-prompted enquiry from HMRC might be the first clue many personal representatives may have that there are cryptoassets in an estate.

Even where a deceased’s cryptoassets can be identified, that does not mean that personal representatives will be able to realise their value. For cryptoassets held in the deceased’s own custody (rather than, for example, held by an exchange or other custodian), the personal representatives will not be able to make a sale or transfer unless they can discover the private keys. This does lead to the possibility of a worst-case scenario where the personal representatives and HMRC know that there are cryptoassets in the estate, and HMRC are asking for tax, but the assets cannot be sold to pay it.

What should you do?

This illustrates well the importance of succession planning for those with cryptoassets. A Will by itself is not enough; you also need to ensure you have a system in place for your personal representatives to be able to identify your assets and also access the necessary private keys. This is a complex topic, and there are a variety of different solutions that might be appropriate in different circumstances, but the Private Wealth and Tax team at Quastels is well-qualified to be able to advise.

Read More

Business Property Relief – Last Call Before the Cap

The changes to Business Property Relief (BPR) that come into force on 6 April 2026 are fast approaching. There is however still time to mitigate your exposure to IHT and the potential impact of the new regime.

For a full summary of the changes coming into effect, please see our previous article here. By way of brief summary, the changes will mean that from 6 April 2026 a cap will be introduced on the total value of property on which BPR can be claimed at a rate of 100%. The subsequent changes announced on 23 December 2025, mean that the 100% relief will be available on up to £2.5million of qualifying business assets and anything above this will be limited to a 50% relief.

The introduction of this threshold is likely to result in more individuals having a sizeable IHT bill on their passing. There is, however, still time to utilise the current regime related to BPR before the 6 April 2026, and this could include making lifetime gifts of company shares or redirecting those assets into a trust.

Let us consider an example of gifting assets to a trust:

An individual currently holds unquoted shares valued at £8,000,000 in their personal name.  The unquoted shares have been held by the individual for over two years and meet the requirements and therefore would qualify for BPR at a rate of 100%.

The gift to the trust is made before 6 April 2026:

If the individual was to set up a trust (for the benefit of their children, for example) and make a gift of the total value of the unquoted shares which qualify for BPR before 6 April 2026 into this trust, the value chargeable to IHT on the entry of the assets into the trust would be zero as the gift qualifies for BPR in full. The individual would have therefore made a gift removing the assets from their estate without any immediate IHT charge.

The gift to the trust is made after 6 April 2026:

If, however, the same individual was to make a gift into the trust after 6 April 2026, only the first £2,500,000 would qualify for relief at the 100% rate.  The remaining £5,500,000 would benefit from relief at a rate of 50%, leaving £2,750,000.  After deducting the Nil Rate Band of £325,000, this leaves £2,425,000 which is subject to a lifetime IHT rate of 20%, meaning that the IHT payable upon putting these assets into trust is £485,000.  In effect, this will be 10% of the value of the transfer in excess of £3,150,000 (assuming the Nil Rate Band is available in full).

Tax on Death

In either case, if the individual dies within seven years of the transfer, the gift would potentially be subject to tax upon death at the full 40% rate of IHT.  If that death takes place from 6 April 2026, the new restrictions on BPR will apply, even if the gift was made before that date.

What Should I Do?

At the time of publication, there is still just about time to explore the options to mitigate your exposure to IHT in relation to your qualifying business assets. Whilst making a gift to a trust for example could result in no immediate IHT implications, anyone looking to make those gifts should be aware of the potential implications if they were to die within seven years of making this gift as well as the ongoing tax liability in relation to the assets being held within the trust. Further planning to consider therefore could be term life insurance policies which could pay out to cover the IHT due in the event of death within seven years.  Alternatively, whole of life policies could be used to provide a payment on death to cover the IHT due on a business.  When creating trusts, it is also worth considering whether it is possible to split the gift with a spouse or civil partner, in order to make the most of both parties’ allowances.

If you are planning to utilise BPR as part of your succession plan before the changes on 6 April 2026, please do contact the Private Wealth and Tax team at Quastels.

Read More

When a Treaty Becomes a Treat: Inheritance Tax and Indian Domiciliaries

Introduction

Almost a year has passed since the abolition of the concept of non-domicile for UK tax purposes and for us advisors, this year has felt like a decade. With the dust settling and our fiscal fatigue beginning to lift, many global families are still wondering how to approach the most emotive tax of them all: UK inheritance tax (IHT). Here is where treaties can become quite the treat.

For many UK resident individuals with Indian roots, one source of potential assistance is the 1956 UK India Estate Duty Treaty (the Treaty). In short, the Treaty can, in certain circumstances, override and effectively disapply the UK’s statutory concept of long-term residence (formerly deemed domicile). The surprising effect of this is that UK residents who would otherwise be long-term resident and exposed to IHT on worldwide assets, are saved by virtue of their Indian domicile status and taken out the the IHT net on on-UK assets.

Some will point out that there is a similar provision under the treaty between the UK and Pakistan but this article focuses on the Treaty and Indian connected individuals.

The Treaty and UK Domestic Law

Now, importantly, although India abolished estate duty in 1985, the Treaty remains in force for IHT purposes. Even more interestingly for tax aficionados like us is that, unlike most of the UK’s estate tax treaties, the Treaty contains a deemed domicile/long-term residence override.

So, let’s recap the UK position:

Under UK tax law, IHT applies to:

• UK-situated assets of all individuals; and
• Worldwide assets of individuals who are UK domiciled or long-term residence/deemed domiciled.

Deemed domicile historically arose after 15 years of UK residence under the 15 out of 20-year rule. Under the post-2025 long-term residence regime, individuals can similarly fall within the worldwide IHT net after being UK resident for 10 out of the previous 20 tax years.

However, the Treaty contains a provision which focuses on domicile as a common law principle and which means, in practice that:

• If an individual is UK resident; but
• Remains Indian domiciled under general law; and
• Has not acquired a UK domicile of choice,

then the Treaty can allocate primary taxing rights over non-UK assets to India for IHT purposes.

Given that India no longer levies estate duty, the effect is that UK IHT should not apply to non-UK assets, even if the individual is deemed domiciled or a long-term UK resident under UK law.

Considering IHT can apply both on death and in other lifetime circumstances including trust structuring, this is quite the fiscal outcome if the conditions line up.

Key Conditions

As lawyers will say ad nauseam, careful analysis is required and this is certainly no less the case with the Treaty and its application.

Broadly, the individual must:

• Be within the personal scope of the Treaty, and so be UK resident at the time of death or other relevant tax events;
• Be Indian domiciled under Indian law;
• Not have acquired a UK domicile of choice from an English law perspective; and
• Be able to evidence continuing intention to return to India where relevant.

Practical Considerations

Accordingly, this is a question of both law and fact. In this case, the factual pattern is key in establishing the legal position in both jurisdictions. Any clients who may find themselves capable of benefitting from the Treaty should consider:

• Long-term intentions and retirement planning;
• Location of family and social ties;
• Property ownership;
• Wills and succession framework;
• The need for a domicile statement backed up by current and historic behaviour.

As with many areas of law but particularly so with the area of domicile, the absence of documentation can be fatal (without wanting to insert a pun needlessly).

HMRC

Anyone seeking to take advantage of the Treaty should be mindful of a possible investigation by HMRC as to their domicile post death. If this cannot be resolved through correspondence or agreement, then the deceased’s estate may have to seek a court order, as ultimately only the court can determine a person’s domicile. The court is likely to order a full trial, where detailed evidence of the deceased’s life will be reviewed and examined so that the court can come to a final conclusion as to whether the deceased acquired a domicile of choice in the UK or maintained their domicile of origin in India.

How We Can Help

Our Private Wealth & Tax team at Quastels is well placed to advise UK resident individuals and families with Indian roots on whether the Treaty can apply in their circumstances. Our advice would typically involve:

• Analysing domicile status under English common law principles;
• Considering and quantifying exposure under both domestic IHT rules and the Treaty;
• Preparing domicile statements and supporting evidence;
• Coordinating cross-border advice with Indian counsel;
• Designing succession and trust structures aligned with the Treaty.

With the UK’s IHT regime now focused on residence, the Treaty remains one of the most impactful and, in the case of many Indian families, an often overlooked tool in estate planning.

To discuss the content of this article, please contact Ben Rosen, Private Wealth & Tax Partner, and Thomas Klemme, Private Wealth Disputes Partner.

Read More