After section 162A (liabilities attributable to financing excluded property) insert—

“162AALiabilities attributable to financing non-residents’ foreign currency accounts

(1)

This section applies if—

(a)

in determining the value of a person’s estate immediately before death, a balance on any qualifying foreign currency account (“the relevant balance”) is to be left out of account under section 157 (non-residents’ bank accounts), and

(b)

the person has a liability which is attributable, in whole or in part, to financing (directly or indirectly) the relevant balance.

(2)

To the extent that the liability is attributable as mentioned in subsection (1)(b), it may only be taken into account in determining the value of the person’s estate immediately before death so far as permitted by subsection (3).

(3)

If the amount of the liability that is attributable as mentioned in subsection (1)(b) exceeds the value of the relevant balance, the excess may be taken into account, but only so far as the excess does not arise for either of the reasons mentioned in subsection (4).

(4)

The reasons are—

(a)

arrangements the main purpose, or one of the main purposes, of which is to secure a tax advantage, or

(b)

an increase in the amount of the liability (whether due to the accrual of interest or otherwise).

(5)

In subsection (4)(a)—

“arrangements” includes any scheme, transaction or series of transactions, agreement or understanding, whether or not legally enforceable, and any associated operations;

“tax advantage” means—

(a)

the avoidance or reduction of a charge to tax, or

(b)

the avoidance of a possible determination in respect of tax.”

After subsection (1) insert—

“(1A)

In a case in which the value of a person’s estate immediately before death is to be determined, where a liability was discharged in part before that time—

(a)

any part of the liability that, at the time of discharge, was not attributable as mentioned in subsection (1) is, so far as possible, to be taken to have been discharged first,

(b)

any part of the liability that, at the time of discharge, was attributable as mentioned in section 162B(1)(b), (3)(b) or (5)(c) is, so far as possible, only to be taken to have been discharged after any part of the liability within paragraph (a) was discharged,

(c)

any part of the liability that, at the time of discharge, was attributable as mentioned in section 162AA(1) is, so far as possible, only to be taken to have been discharged after any parts of the liability within paragraph (a) or (b) were discharged, and

(d)

any part of the liability that, at the time of discharge, was attributable as mentioned in section 162A(1) or (5) is, so far as possible, only to be taken to have been discharged after any parts of the liability within paragraphs (a) to (c) were discharged.”