Internal Revenue Service

Everything you need to know about Federal Transfer Certificates

Feb 25, 2020 4:39:23 PM

Did you know that if you want to sell or transfer a shareholding, or close a bank account in the USA that was worth over $60,000 at the date of death, you will first need to obtain a Federal Transfer Certificate?

What is a Federal Transfer Certificate?

The Federal Transfer Certificate (FTC) is a document issued by the USA tax authority, the Internal Revenue Service (IRS). It is also sometimes referred to as Form 5173. The FTC is proof that Inheritance Tax clearance has already been obtained in the UK and therefore the assets held in the estate are exempt from Inheritance Tax in the USA.

This is possible because there is a double taxation treaty in place between the UK and the USA which means that if the assets have been included in the Inheritance Tax return in the UK, they do not also need to be declared in the USA. For this reason, a Federal Transfer Certificate is not required if a Grant of Probate has also been obtained within the USA.

How do I obtain a Federal Transfer Certificate?

To obtain the FTC, an application must be submitted to the IRS along with full UK Inheritance Tax return paperwork. For UK citizens, Title Research can assist with preparing and submitting the application documents. We can also assist with any queries that may be raised by the IRS whilst the application is being processed.

How long does a Federal Transfer Certificate application take?

The current standard timescale for the IRS to process an FTC application is 9 to 12 months. The processing of the FTC application is subject to Federal Government opening times. 

How does this impact the UK Inheritance Tax return?

Because the FTC is evidence of tax clearance in the UK, it is essential that the American assets have been included in the UK Inheritance Tax return at the time of filing. The American assets must be identifiable in either the IHT205 or IHT400, depending on the return that was made for the estate.

If the American asset was not declared in the UK Inheritance Tax return, it will be required that you submit a corrective account to HMRC to include the asset, prior to being able to apply for the FTC.

One Executor will need to be nominated as the lead Executor for the estate and it is to their name and address, as declared on the initial application, that the resulting Certificate will be issued.

Title Research can navigate the often complex process of selling and transferring US shareholdings. If a Federal Transfer Certificate is required to obtain tax clearance from the IRS, let us take on this tedious task for you. We can complete this work as part of the share sale process or if you’re currently administering foreign shareholdings, we can offer it as a standalone service. To find out more, call our Client Services Team on 0345 87 27 600 or click here to get in touch.

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Topics: North America, Federal Transfer Certificate, Overseas Assets, US Shareholdings