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HMRC internal manual

Inheritance Tax Manual

Foreign settled property: identifying settled property

The expression ‘property comprised in a settlement’ in IHTA84/S48 (3) means the items of property (IHTM04030) held in the settlement (IHTM16042) at the time of the chargeable event you are considering. In determining the locality (IHTM27071) of any particular property you should consider the property in its current form and not its previous history.


In 2004 Stella, when domiciled in Germany, transfers a house in Germany and some UK securities into a settlement for Xavier for his life with remainder to Yolanda. On Xavier’s death - the potentially chargeable event - the settled fund consists of

  • Option 1: a villa in Spain.
  • Option 2: land in the UK.
  • Option 3: a house in Spain and some UK securities.

With Option 1 the villa is excluded property even though it partly represents the proceeds of what was previously UK property (the securities).

The land in Option 2 is not excluded property although it is partly derived from the proceeds of sale of the German house.

In Option 3 the house in Spain is excluded property but the UK securities are not.