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HMRC internal manual

Inheritance Tax Manual

Government securities in foreign ownership: exclusion from charge to IHT

The Inheritance Tax (IHT) legislation has its own specific provisions which treat FOTRA securities (IHTM04291) as being excluded property (IHTM04251) subject to the conditions stated in the legislation.

The exclusion (or otherwise) of an exempt security from IHT is governed by those specific provisions and not solely by the general exemption from UK Taxation. This view is supported by the decision in the case of Von Ernst and Cie S.A. v IRC [1980] I WLR 468.

Exempt securities are excluded from the charge to IHT

  • if they are owned beneficially (IHTM04031) by a person (IHTM04052) who meets the conditions for residence specified in the issue of the securities, IHTA84/S6 (2), together with any relevant conditions for ordinary residence (IHTM04295) and domicile (IHTM04296), or
  • if a person who meets the specified conditions is entitled to a qualifying interest in possession (IHTM16062) in the securities held in a settlement (IHTM16042), IHTA84/S48 (4)(a), or
  • if, whilst no qualifying interest in possession subsists in the securities, it is shown that all known persons who have received or might receive any benefit from the settlement, or who might become beneficially entitled to a qualifying interest in possession in it, have met or do meet the specified conditions, IHTA84/S48 (4)(b).