IHTM47052 - Long-term UK residence test: Foreign settled property: Relevant Property
Source: gov.uk (2025-04-07)


Subject to various exemptions, property comprised in a settlement where there is no qualifying interest in possession (IHTM16061 (https://www.gov.uk/hmrc-internal-manuals/inheritance-tax-manual/ihtm16061)) will be relevant property.

Whether foreign property comprised in the settlement is excluded property (IHTM04251 (https://www.gov.uk/hmrc-internal-manuals/inheritance-tax-manual/ihtm04251)) depends on the date of the chargeable event and the circumstances of the settlor:

Where a chargeable event occurs before 6 April 2025, foreign settled property will be excluded property where the settlor was domiciled (IHTM13000 (https://www.gov.uk/hmrc-internal-manuals/inheritance-tax-manual/ihtm13000)) outside the UK at the time when the property (IHTM04030 (https://www.gov.uk/hmrc-internal-manuals/inheritance-tax-manual/ihtm04030)) became comprised in the settlement.

Where the chargeable event occurs on or after 6 April 2025, whether foreign settled property is excluded property depends on whether the settlor is alive at the date of the chargeable event.

For chargeable events on or after, 6 April 2025 if the settlor was alive at the date of the chargeable event, foreign settled property will be excluded property if the settlor was not a long-term UK resident (IHTM47000 (https://www.gov.uk/hmrc-internal-manuals/inheritance-tax-manual/ihtm47000)) at that date.

For chargeable events on or after 6 April 2025, if the settlor had died before the date of the chargeable event, then:

If the settlor died on or after 6 April 2025, foreign settled property will be excluded property if the settlor was not a long-term UK resident immediately before their death.

If the settlor died before 6 April 2025 foreign settled property is excluded property where the settlor was domiciled outside the UK at the time when the property became comprised in the settlement.

There will be no chargeable transfer when the settlement is created or when additions are made by the settlor (IHTM42075 (https://www.gov.uk/hmrc-internal-manuals/inheritance-tax-manual/ihtm42075)) if foreign property is added to a settlement at a time:

when the settlor is not long-term UK resident (from 6 April 2025) or

was neither domiciled (IHTM13000 (https://www.gov.uk/hmrc-internal-manuals/inheritance-tax-manual/ihtm13000)), or deemed domiciled (IHTM13024 (https://www.gov.uk/hmrc-internal-manuals/inheritance-tax-manual/ihtm13024)) in the UK (before 6 April 2025)

as the transfer will be of excluded property (IHTM04260 (https://www.gov.uk/hmrc-internal-manuals/inheritance-tax-manual/ihtm04260)).

There will be a charge on any ten-year anniversary (IHTM42081 (https://www.gov.uk/hmrc-internal-manuals/inheritance-tax-manual/ihtm42081)) which occurs when a settlor is a long-term UK resident.

There will also be a proportionate charge (IHTM42110 (https://www.gov.uk/hmrc-internal-manuals/inheritance-tax-manual/ihtm42110)) when a settlor ceases to be long-term UK resident, because at that point foreign settled property will cease to be relevant property.

Examples

Example 1

Anika made a settlement of foreign assets in 2004 when she was non-UK domiciled. Anika died in 2012. The long-term residence test is not relevant to Anika’s settlement as she is a settlor who died before 6 April 2025, and so the property is excluded property because she was non-domiciled at the time the assets became comprised in the settlement.

Example 2

Marianne is non-domiciled and became resident in the UK in 2021-22. In 2023 she settled non-UK assets in the Marianne Discretionary Settlement for her children and grandchildren.

As Marianne was not UK domiciled or deemed UK domiciled when she created the settlement, there was no entry charge in 2023.

The first ten-year anniversary of the settlement is in 2033, by which time Marianne is a long-term UK resident and so there is a charge of up to 6% of the value of the assets comprised in the settlement. The charge will reflect the number of years that the property was relevant property. Marianne was long-term resident from 6 April 2031 so 2/10 years, applied to the maximum 6% this would result in a rate of up to 1.2%.

Marianne dies in 2040, when she is still a long-term resident. As Marianne cannot benefit from the settlement, there is no charge on her death, regardless of whether or not the transitional relief applies (IHTM47022 (https://www.gov.uk/hmrc-internal-manuals/inheritance-tax-manual/ihtm47022)).

Future ten-year anniversaries and exits from the settlement after Marianne’s death are subject to IHT charges of up to 6% on each occasion because she was a long-term resident at her death.

Example 3

Jim creates a settlement with £10m non-UK assets in November 2024 when he is non-UK resident and non-UK domiciled. He becomes UK resident in 2027 and becomes a long-term UK resident in 2037. Jim leaves the UK in 2050.

When the settlement was created in November 2024, the test for excluded property was whether non-UK assets were settled by a person who was non-UK domiciled at the time the assets became comprised in the settlement. There is therefore no chargeable event when the settlement was created as Jim is not domiciled in the UK.

There is no charge on the first ten-year anniversary of the settlement in 2034 as Jim is not a long-term UK resident at that time.

There will be a ten-year anniversary charge of up to 6% of the value of the assets comprised in the settlement in 2044 as Jim is now a long-term UK resident. However, the rate will be reduced to reflect the period during which the assets in the settlement were not relevant property. Jim has been long-term resident for 7/10 years, so applied to the maximum 6% this would result in a rate of up to 4.2%.

There will be a ten-year anniversary charge in 2054 (again up to 6% of the value of the assets in the trust). Jim remains long-term UK resident, despite having become non-resident in 2050, as he still satisfies the 10 out of 20 test (IHTM47 (https://www.gov.uk/hmrc-internal-manuals/inheritance-tax-manual/ihtm47000)000 (https://www.gov.uk/hmrc-internal-manuals/inheritance-tax-manual/ihtm47000))

There would be a proportionate charge on 6 April 2061 when Jim ceases to be a long-term UK resident, because at that point he has ten consecutive years of non-residence.

If Jim is able to benefit from the settlement, this would be a gift with reservation of benefit (IHTM14301 (https://www.gov.uk/hmrc-internal-manuals/inheritance-tax-manual/ihtm14301)). Jim will not be able to benefit from the transitional relief (IHTM47060 (https://www.gov.uk/hmrc-internal-manuals/inheritance-tax-manual/ihtm47060)) because non-UK assets were not settled before 30 October 2024. The property comprised in the settlement would be treated as part of his death estate if he died whilst he was long-term UK resident.