Excluded property trusts—key events affecting IHT status
Produced in partnership with Graham Callard, Barrister of 9 Stone Buildings
Excluded property trusts—key events affecting IHT status

The following Private Client guidance note Produced in partnership with Graham Callard, Barrister of 9 Stone Buildings provides comprehensive and up to date legal information covering:

  • Excluded property trusts—key events affecting IHT status
  • Meaning of excluded property
  • Additions to an excluded property settlement after change of domicile
  • Property transferred between settlements
  • Purchased interests and the 2006 and 2012 changes
  • Initial life interest of the settlor and/or spouse
  • Interaction with the reservation of benefit rules
  • Interaction with the pre-owned asset regime
  • Excluded property and trusts with special regime
  • Excluded property—planning points
  • more

FORTHCOMING CHANGE: At Budget 2018, the government announced that legislation would be included in Finance Bill 2019–20 to reflect HMRC's established legal position in relation to the inheritance tax (IHT) treatment of additions to existing trusts. Draft legislation was published on 11 July 2019. The legislation, which confirms that additions of assets by UK-domiciled (or deemed domiciled) individuals to trusts made when they were non-domiciled, are not excluded property and are therefore within the IHT net. For further information, see: Budget 2018—Private Client analysis—FB 2020 to legislate HMRC’s position on additions to excluded property trusts and Inheritance Tax and excluded property added to and transferred between trusts (11 July 2019).

Generally, property in trust which is situated abroad is excluded property for the purposes of inheritance tax (IHT) if the settlor was not UK domiciled at the time that the settlement was made.

Such property remains excluded property even after the settlor has become domiciled or deemed domiciled in the UK, except in cases where the settlor is a formerly domiciled resident. A formerly domiciled resident is a UK-resident individual who was born in the UK and acquired a UK domicile of origin at birth—see Practice Note: Deemed domicile for tax from 6 April 2017.

Settlements containing excluded property are often referred to as excluded property trusts.

The Practice Note: UK taxation of offshore