Foreign settled property (
IHTM16000) is only excluded property (
IHTM04251) where the settlor, (
IHTM16000) was domiciled (
IHTM13000) outside the UK at the time
when the property (
IHTM04030) was settled. The domicile of
the trustees (
IHTM16000) and beneficiaries is not
relevant. 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 (
IHTM27071 of the property. This is so
even if any person entitled to an interest in possession (IIP) (
IHTM16000) in the property, who is
beneficially entitled (
IHTM04031) to the property, IHTA84/S49
(1) is domiciled abroad.
However, a claim for tax arising on the death of a person
entitled to an IIP in foreign property settled by a UK domiciliary
may be affected by the application of a Double Taxation Convention
or Agreement (
IHTM27161) which may override the
general rule above. This will usually involve a pre-1975 Double
Taxation Agreement and a settlement the ‘proper law’ of
which is claimed to be other than that of part of the UK. Refer to
TG any case where the ‘proper law’ of a settlement is
claimed to be non-UK.
If the settlement is a discretionary trust, the
anti-avoidance provisions of IHTA84/S80 to IHTA84/S82 may mean that
the domicile of some person(s) other than the settlor is also
relevant.
The position of a settled reversionary interest (
IHTM16000) is considered at
IHTM04286.
