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Where excluded property (IHTM04251) under IHTA84/S48(3) or S48(3A) (“specified excluded propertyâ€�) was comprised in a settlement immediately before 30 October 2024, this will not be subject to charges under the gift with reservation provisionsÌý(IHTM14301)Ìýor certain charges under the qualifying interest in possession regimeÌý(IHTM16061)Ìýin the circumstances explained below.ÌýÌý

IHTA84/S48(3) covers foreign property comprised in a settlementÌýwhere the settlor was domiciled outside of the UKÌý(IHTM13000)Ìýwhen the property became comprised in the settlement and IHTA/S48(3A) covers holdings in AuthorisedÌýUnit Trusts (AUTs) or a shareÌýin an Open-Ended Investment Company (OEIC)Ìýwhere the settlor was domiciled outside of the UK when the property became comprised in the settlement.ÌýÌý

The propertyÌýmust also be foreign property or a holding in an AUT or a share in an OEICÌýat the time of the charge for the transitional provision to apply.Ìý

However, specified excluded propertyÌýwhich was comprisedÌýin a settlement immediatelyÌýbefore 30 October 2024 mayÌýbe subject to charges under the relevant property regime (IHTM42161) from 6 April 2025Ìý(IHTM47052).ÌýÌý

Qualifying interest in possessionÌý

Specified excludedÌýpropertyÌýcomprisedÌýin a qualifying interest in possessionÌýsettlement (IHTM47051)Ìýbefore 30 October 2024 will not be subject to charge when the qualifying interest in possessionÌýcomes to an endÌý(IHTM16091)Ìýor on the death of the qualifying interest in possessionÌýbeneficiaryÌý(IHTM04043).ÌýÌýÌýÌý

• TheÌýforeignÌýpropertyÌýin Trevor’s settlement did not qualify as excluded property on 30 October 2024 because he was UK domiciled at the time the property became comprisedÌýin the settlement.ÌýÌý

• If Trevor can benefitÌýfrom the settlement, the gift with reservation of benefitÌýprovisions apply to treat the assets as part of Trevor’s estate if he dies before 6 April 2032Ìýas he would still be long-term UK resident.ÌýÌý

• If Trevor’s settlement comprisesÌýof relevant property, that regime will also apply until Trevor ceases to beÌýaÌýlong-term UK resident.Ìý That means there is a charge on the ten-year anniversary on 31 December 2030.ÌýÌýÌýÌý

• From 6 April 2032, foreign propertyÌýin Trevor’s settlement would be excluded property, becauseÌýhe is no longer long-term UK resident.Ìý The gift with reservation of benefit provisions would notÌýapplyÌýon death or cessation of reservation whilst he was not a long-term UK resident.Ìý

• There will also be an exit charge (IHTM42110) when Trevor ceases to be long-term UK resident on 6 April 2032 inÌýrespect ofÌýthe foreignÌýproperty ceasing to be relevant property.ÌýÌý

• If ZhantiÌýmade a settlement before she became deemed domiciled, any specified excluded property comprisedÌýin the settlement as atÌý30 October 2024 willÌýbenefitÌýfrom the transitional provisions and will not be subject to the gift with reservation of benefitÌýprovisions or charges under the qualifying interest in possession provisions, if applicable.ÌýÌýÌý

• If ´Ü³ó²¹²Ô³Ù¾±â€™sÌýsettlement has UK assets or assets within Schedule A1 IHTA 1984 (overseas property with value attributable to UK residential property) then such property will not benefitÌýfrom this treatment, even if it is later sold and becomes foreignÌýsitusÌý

• If ´Ü³ó²¹²Ô³Ù¾±â€™sÌýsettlement comprisesÌýrelevant property, that regime will apply to both UK and foreignÌýsettled assets from 6 April 2025 until ZhantiÌýceases to be long-term residentÌýon 6 April 2027.Ìý

• This means that, if there is a ten-year anniversary after 6 April 2025 while ZhantiÌýis a long-term resident, i.e.Ìý2025-2026 and 2026-2027, then bothÌýUK and foreign settled assets will be chargeable.ÌýÌý

• There will be an exit charge in relation to the non-UK assets (which become excluded property) when ZhantiÌýceases to be long-term resident on 6 April 2027.ÌýÌýÌýÌý

• The non-UK property in the Arnold settlement was excluded property as atÌý30 October 2024 and so benefitsÌýfrom the exemption from qualifying interest in possessionÌýcharges whilst Chidi’s interest in possession subsists.ÌýÌý

• Chidi dies on 8 July 2026 and Linda’s interest in possession begins.Ìý The protection from qualifying interest in possessionÌýcharges applies so that the value of the foreignÌýtrust property is left outÌýof Chidi’s estate on death.ÌýÌýÌýÌý

• Linda’s interest is not a qualifying interest in possessionÌýso that the non-UK settled property will then be subject to the relevant propertyÌýregime,Ìýand a 10-year anniversary charge will arise in 2030 unless it isÌýexcluded property under the new rules, which will depend on Arnold’s long-term residence statusÌýat that time.Ìý

• The UK sterling bank account cannot benefitÌýfrom the transitional provisionÌýbecause, at the time of Flora’s death, it was not foreign property or invested in an AUT or OEIC.Ìý The bank account will be subject to the gift with reservation of benefit provisions and treated as part of Flora’s estate.Ìý

• The US shares also cannot benefitÌýfrom the transitional provision as they were not settled property as atÌý30 October 2024.ÌýThe bank account will be subject to the gift with reservation of benefit provisions and treated as part of Flora’s estate.Ìý

• However, the Spanish bank account with the remaining 400,000 euros can benefitÌýfrom the exemption asÌýit wasÌýspecified excludedÌýproperty atÌý30 October 2024 and wasÌýforeign settled property at the time of Flora’s death.Ìý So,Ìýthe Spanish bank account is not subject to the gift with reservation of benefit provisions at Flora’s death.Ìý

• If some of the 400,000 euros had been invested in UK sharesÌýbefore Flora’s death, but these were sold and the proceeds returned to the Spanish bank accountÌýbefore 7 July 2029, the transitional provision would still be available, as the requirement is only that the property was foreign property (or an AUT or OEIC) at 30 October 2024 and the date of death.