Excluded property and situs of assets

Produced by Tolley

The following Trusts and Inheritance Tax guidance note Produced by Tolley provides comprehensive and up to date tax information covering:

  • Excluded property and situs of assets
  • The concept of excluded property
  • The domicile connection
  • Situs of assets
  • Special cases
  • Settled property
  • Reversionary interests
  • Victims of war
  • Public service
  • Liabilities in respect of excluded property

Excluded property and situs of assets

The concept of excluded property

Inheritance tax (IHT) does not apply to excluded property. Specifically, this means that:

  1. excluded property does not fall into an individual’s chargeable estate for IHT on death

  2. excluded property is not included when calculating any transfer of value made by an individual (including that arising on the termination of a qualifying interest in possession)

  3. excluded property is not ‘relevant property’, and therefore not subject to the periodic 10-year or exit charges on trusts

  4. liabilities relating to excluded property are not deductible for IHT purposes

The domicile connection

There are a number of categories of excluded property, the most important of which is property situated outside the UK, owned by a non-UK domiciled individual. An individual’s potential UK inheritance tax liability will therefore depend on:

  1. his domicile status (see the Domicile for UK inheritance tax guidance note)

  2. the location of his property

IHTA 1984, s 6(1)

Situs of assets

Property is located in the place determined by the rules of common law. These are known as the lex situs rules. The situs of the most common assets are summarised below:

LandIs located in the country where it is physically sited
ChattelsAre located in the country where they are physically sited
Simple contract debtsAre located in the country where the debtor resides
Bank accountsAre located at the branch of the bank at which the account is held
Specialty debts and negotiable instrumentsAre those made by deed or statute. If secured on property situated in the

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