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HMRC internal manual

Inheritance Tax Manual

Government securities in foreign ownership: conversion to FOTRA gilts and the relevant property trust charge

A charge to tax arises when property (IHTM04030) in a relevant property trust ceases to be relevant property. (IHTM04096) Where property in a relevant property trust becomes excluded property (IHTM04251) it ceases to be relevant property, IHTA84/S58 (1)(f) and a charge to tax arises. However, where property ceases to be relevant property by reason only of its investment in FOTRA gilts, (IHTM04291) the charge does not apply to such a conversion if the settlor’s general law domicile was outside the UK at the time when the settlement was made, IHTA84/S65 (8).

When FOTRA gilts replaced ‘exempt securities’ in 1998, all non-FOTRA gilts were deemed to be FOTRA after that date. As a result of this change, it was possible that property held in a relevant property trust could be reclassified as excluded property and a charge to tax arise. FA98/S161 (3) bars a charge under IHTA84/S65 where it arises solely because of this change.