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HMRC internal manual

Inheritance Tax Manual

Foreign settled property: the settlor's domicile

Foreign settled property is only excluded property (IHTM04251) where the settlor was domiciled (IHTM13000) outside the UK at the time when the property (IHTM04030) was settled. The domicile of the trustees (IHTM16050) 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 Inheritance Tax regardless of the locality (IHTM27071) of the property. This is so even if any person entitled to a qualifying interest in possession (IIP) (IHTM16062) in the property, who is beneficially entitled (IHTM04031) to the property, IHTA84/S49 (1) and S49 (1A) is domiciled abroad.

However, a claim for tax arising on the death of a person entitled to a qualifying IIP in foreign property settled by a UK domiciliary may be affected by the application of a DoubleTaxation Convention or Agreement (IHTM27161) as it may override the general rule above. This will usually involve a pre-1975 Double Taxation Agreement and a settlement where the ‘proper law’ is claimed to be non-UK. Seek advice from Technical if this is claimed.

If the settlement is a relevant property trust (IHTM42161), 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 is considered at IHTM04286.