Inheritance Tax Act 1984 section 162AA

Liabilities attributable to financing non-residents' foreign currency accounts

Section 162AA restricts the deduction of liabilities used to finance a non-resident's qualifying foreign currency bank account where the account balance is already excluded from the estate under the exemption for non-residents' bank accounts.

• Where a qualifying foreign currency account balance is exempt from inheritance tax under section 157, any liability used to finance that balance is generally disallowed as a deduction from the estate.
• If the liability exceeds the exempt account balance, only the excess may be deducted — but not if the excess arose from tax avoidance arrangements or from an increase in the liability amount (such as accrued interest).
• "Arrangements" is broadly defined to include any scheme, transaction, agreement, understanding, or associated operations, whether or not legally enforceable.
• "Tax advantage" means the avoidance or reduction of a charge to tax, or the avoidance of a possible determination in respect of tax.