Inheritance Tax Explained at British, Irish Chamber Seminar

On Thursday 19 June 2025, the British Chamber of Commerce in Luxembourg (BCC) and the Ireland Luxembourg Chamber of Commerce (ILCC) held an evening event at the Hotel Parc Belair in Luxembourg-Merl.

Ailbhe Jennings of the ILCC introduced Ken O'Mahony, an international tax and finance expert, who would make a presentation on "Personal Tax and Inheritance Considerations for Individuals with Interests in Luxembourg, Ireland and The UK".

Background

Luxembourg, Ireland and the United Kingdom have distinct tax and inheritance laws that significantly impact individuals and independent businessmen and women.

In Luxembourg, personal income tax follows a progressive system: independent professionals and investors are taxed similarly. There is no wealth tax for individuals, but inheritance tax applies based on kinship and the location of assets. Real estate in Luxembourg is always taxed locally, regardless of the heir's residence. Direct descendants benefit from reduced rates, and business transfers within families often receive tax relief.

The United Kingdom and Ireland both impose taxes on inherited wealth, but their systems differ in structure and thresholds.

Key differences lie in who is taxed — the estate in the UK versus the beneficiary in Ireland — and in the tax-free thresholds and rates. Ireland's system is more relationship-sensitive, while the UK offers broader estate-based exemptions. These distinctions affect estate planning strategies in both jurisdictions.

For independent businessmen, Luxembourg offers structured estate planning benefits, whereas Ireland's and the UK's systems focus on simpler inheritance structures but with higher rates. Choosing between the three depends on personal and business needs, as the three jurisdictions have distinct advantages.

Presentation

Ken O'Mahony used a 48-page PowerPoint presentation, equalling around a page per attendee, to address the topic. He started by explaining the six topic areas he would address: an overview by country; Inheritance from Ireland; Inheritance from Luxembourg; Inheritance from the UK; a view by asset type; and other considerations. He stressed everyone not to underestimate the tax authorities as they have a "huge amount of technology" available to them.

An overview by country

The three countries have totally different systems:

- Ireland focuses on the beneficiary who is taxed; assets left to a witness are invalid; in the case of no wills, a surviving spouse will receive 2/3 of the estate, with children receiving 1/3. Capital Acquisitions Tax (CAT) applied to gifts and inheritances; no CAT (at 33%) for spouse, civil partner or Group A (€400k for child, child of spouse, minor child, foster child) or Group B (€40k for (grand) parent, brother / sister or grandchild) or Group C (€20k for all others). He also advised to be beware of aggregation rules and of gift splitting. For further information, see https://www.revenue.ie/.

- Luxembourg uses the term "tax domiciled"; he advised to leave a signed will; however, the Luxembourg Civil Code indicates that 75% of one's estate goes to one's children under "forced heirship rules". If there are no children, one's spouse is entitled to 50%. Included in one's estate are recent gifts (given <12 months before death); real estate outside Luxembourg is exempt. He explained that there is a sliding rate of tax in operation here, with the base rate 0-15%. For further information, see https://guichet.public.lu/en.

- In the UK, the estate is taxed, with England and Scotland having different rules. Again, signed and witnessed wills are important. If no wills, a spouse would normally receive 100%. Regarding oversseat assets, the UK is different and depends on being UK-domiciled. The first £325k is exempt from tax; this can be another £175 if leaving one's home to direct descendants, with transpers to a spouse civil partner being exempt. Since 2017, when the law changed, one's estate is more than what is in the UK; and the current UK government has made further changes; as a result, many people have left the UK to become non-domiciled. UK Inheritance Tax is 40%. For further information, see https://www.gov.uk/ or https://www.gov.uk/government/organisations/hm-revenue-customs.

He stressed that it is very important to get advice, and that it is crucial to get good advice: he talked about the difference between wealth management firms, accountancy firms and accountancy, advisory and tax firms, emphasising that the complexities occur when estates are cross-border.

Inheritance from Ireland

He explained that residency status is important, with three-year and five-year residency rules in effect regarding domicile. He presented a complex table illustrating how / when an inheritance subject is subject to Irish CAT.

Inheritance from Luxembourg

Living in Luxembourg, what happens when we die? He explained that it relates to someone whose primary wealth is in Luxembourg. If the heir is a Luxembourg resident, they are subject to Luxembourg Inheritance Tax. If the heir is outside Luxembourg, the rules are very confusing. He also explained that Luxembourg's double taxation agreements do not normally cover inheritance tax.

Inheritance from the UK

The issue here is the deceased's UK residency status. If the heir is in Luxembourg, it depends where the asset is on whether inheritance tax is applied. In principle, Luxembourg does not tax assets from abroad as it assumes that tax has been paid elsewhere.

A view by asset type

- Property and land (immovable assets): core international tax principle: taxed in the country based on the value at the date of death. Many people look at putting property into trusts so it does not become part of an estate
- Cash, cars, jewellery, paintings and other movable property: it is based on valuations and he advised to keep records of everything and to pick tax advisors carefully
- Bonds and shares (public v private company): he warned about the valuation of private company shares
- Farms and businesses: in Ireland, agricultural relief is 90%, with 100% in the UK (with exemptions); for businesses, a "clawback" exists for selling en inherited business within six years

Other considerations

He concluded by emphasising the issues of domiciliation and tax residency. He confirmed that citizenship can be relevant to domiciliation. He encouraged people to explore applying for changing domicile. He also raised the issue of cross-border workers, with questions of where one pay social security, where does one get one's pension and where does one own a property.

He also presented eight separate case studies based on residency and domiciliation, illustrating the complexities in each and every case, illustrating the necessity to get specialist advice. He also mentioned the EU Succession Regulations which were not signed by Ireland, the UK (before Brexit) or Denmark.

He then mentioned about lifetime gift planning (e.g. limit of €3k per person per annum in Ireland, or £250 in the UK; or in Luxembourg where gifts hand-delivered twelve months ago are exempt) and other tax planning examples.

The evening finished with a short Q&A session where attendees asked specific questions, and received specific answers, a closing address by the BCC Chairman, Andrew Notter, and a networking reception.