IHT on overseas property representing UK residential property

Produced by a Tolley Trusts and Inheritance Tax expert

Trusts and Inheritance Tax

Guidance

Background to UK residential property held in offshore structures

This guidance note describes the anti-avoidance provision introduced by Finance (No 2) Act 2017 which brings all UK residential property within the scope of IHT.

Property situated outside the UK which is owned by a non-UK domiciled person is outside the scope of IHT. Such property is designated as ‘excluded property’. See the Excluded property and situs of assets guidance note.

A person who is non-UK domiciled may limit his exposure to IHT on death by keeping some of his assets outside the UK (and outside any other jurisdiction which imposes a similar tax).

As a general principle, UK residential property should always be subject to IHT regardless of the domicile status of its owner because it is, by definition, situated in the UK. However, certain arrangements can be made which wrap up or ‘envelope’ property in overseas assets so that, effectively, the legal location

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