IHTA84/S48 (3) and IHTA84/S80 to 82 mean that property situated
abroad and held in a settlement is excluded property unless the
settlor was domiciled (
IHTM13000) in the UK at the time the
settlement was made.
Beware of property that may be subject to the gift with reservation rules ( IHTM14396)
In the case of property settled by Will, or under the rules of intestacy ( IHTM12000), it will of course be the date of the testator’s or intestate’s death. This does not apply to a reversionary interest in that settled property. ( IHTM27230).
Moreover there are additional requirements for settlements without interests in possession or discretionary trusts that fall within certain anti-avoidance provisions. (IHTM27246) You will therefore need to determine whether a settlement is a non-interest in possession or discretionary trust for IHT purposes and, if so, whether the additional requirements are relevant and (where appropriate) satisfied. If unsure seek advice from TG in IHT Belfast or Nottingham. In Scotland, refer to your Team Leader.
(This text has been withheld because of exemptions in the Freedom of Information Act 2000)
Once you have determined that any property held in a settlement is excluded property:
S, when domiciled abroad, creates a settlement of Spanish
realty. Later he acquires a UK domicile and then adds some
Australian property to the settlement.
The Spanish property is excluded property because of S’s overseas domicile when he settled that property. However, the Australian property is not excluded property as S had a UK domicile when he added that property to the settlement.
S, when domiciled in Germany, settles some German realty and some securities then situated in the UK on X for life with remainder to Y. On X’s death - the potentially chargeable event - the settled fund consists of:
In Option 1, the villa is excluded property even though it
partly represents the proceeds of what was previously UK property
(i.e. the securities). The land in Option 2 is not excluded
property although it is partly derived from the German realty. In
Option 3 the house is excluded property but the securities are not.
It follows that as a general rule property settled by a UK domiciliary is not excluded property - and is therefore within the scope of IHT - regardless of the locality of the property. This is so even if any person entitled to an interest in possession in the property (who is treated under IHTA84/S49 (1) as being beneficially entitled to the property) is domiciled abroad, subject to the possible exception that a Double Taxation Convention overrides this rule. Refer any such claim to TG.
Likewise refer to TG or your team leader in IHT Edinburgh any claim that “proper law” overrides this general rule IHTA84/S158 (1) and (6).