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HMRC internal manual

Inheritance Tax Manual

Foreign settled property: the settlor's domicile

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 thatas 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) isdomiciled 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 DoubleTaxation 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 thanthat 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 toIHTA84/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.