I9.335 Interests in UK residential property
It has been common practice for non-domiciliaries to hold UK residential property through an offshore company or overseas partnership, with the result that the asset held in the estate of the non-domiciliary is excluded property for inheritance tax purposes. Legislation was introduced by F(No 2)A 2017, effective for all chargeable events on or after 6 April 2017, to remove the excluded property status of such structures to the extent that the value in them is attributable to UK residential property1. The legislation adds Schedule A1 to IHTA 1984. For trusts of previously excluded property, the ten year charge after that date will be calculated on the basis that the trust asset is excluded property up to 5 April 2017 but not thereafter2 (see I5.354).
Schedule A1 states that property is not excluded property by virtue of IHTA 1984, ss 6(1) or 48(3)(a) if and to the extent that paragraph 2 or paragraph 3 of the Schedule applies to it3. It is clear therefore that the overseas assets concerned only lose excluded property status to the extent that the value is attributable to a UK residential property interest.
A UK residential property interest is defined as an interest in UK land where the land consists of a dwelling, or where and to the extent that the land includes a dwelling, or where the interest subsists under a contract for an off- plan purchase4. The extent to which the land includes a dwelling