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HMRC internal manual

Inheritance Tax Manual

Pre-owned assets: exemptions: foreign element - foreign domiciliaries: settled property exemption

Where a person who is domiciled outside the UK creates a settlement that contains overseas property, that settlement is an excluded property settlement for Inheritance Tax purposes (IHTM27220). No regard is to be had to any such property for the purposes of the POA charge, FA04/Sch15/Para12(3). This provision provides an exemption for individuals who subsequently become domiciled in the UK and continue to benefit from the settled property and who would therefore no longer be able to rely on the foreign domiciliary exemption (IHTM44054).

If, having become domiciled in the UK the person adds property, wherever it may be situated, to the settlement, the added property may be subject to the POA charge in the normal way. If available, the exemptions and exclusions would apply as they would for any person domiciled in the UK.

The definition for excluded property for inheritance purposes includes interests in UK unit trusts, OEICs and gilts, but this is not extended to the POA charge.