IHTM47051 - Long-term UK residence test: Foreign settled property: Qualifying Interests in Possession

A qualifying interest in possession听(IHTM16060) is where a person entitled to an interest in possession in settled property is deemed听to own the settled property in which their interest subsists (IHTM16061).听

Whether foreign property comprised听in a听qualifying interest in possession听settlement is听excluded property听(IHTM04251)听depends on the circumstances of the settlor and the person with the听qualifying听interest in possession:听

  • At times on or after 6 April 2025,听where there is a living settlor听and both the settlor听and the person with the qualifying interest in possession are not long-term UK residents (IHTM47000),听foreign settled property听will be excluded property.听

  • Where the settlor dies on or after 6 April 2025, if听the settlor was not a long-term resident immediately听before their death听then foreign property comprised听in the settlement will be excluded property听at times where听the person with the听qualifying听interest in possession is听not long-term UK resident.听

  • Where the settlor has died before 6 April 2025, if the settlor was not domiciled听(IHTM13000)听in the UK when the foreign property听became comprised听in the settlement听then the foreign property will be excluded property.听Where the settlor has died before 6 April 2025, the long-term UK residence status of the person with the听qualifying听interest in possession is not relevant.听听

Where non-UK assets were comprised in a settlement and were excluded property immediately before 30 October 2024, these will not be subject to charge when the听qualifying听interest in possession听that subsisted at 30 October 2024听comes to an end or on the death of the interest in possession听beneficiary听(IHTM47022).听

Examples听

Example 1

Jonah made a qualifying interest in possession听settlement in his will and died听in听June 2025, when he was not a long-term UK resident. The life tenant of the settlement is Diana. Diana dies in November 2038.听听

If Diana is a long-term UK resident at her death in November 2038, the settled property will be treated as part of her estate and chargeable to IHT.听听

If Diana is not a long-term UK resident at her death, the foreign property in the settlement will be excluded property and there will be no IHT charge.听听

Example 2听听

Preta听made a qualifying interest in possession听settlement in March 1997 when she was UK domiciled.听

The life tenant of the settlement is Becky.听

The property in the settlement is foreign property.听

Becky is a long-term听UK resident from 6 April听2040 to 5 April听2063.听

Preta is a long-term UK resident from 6 April 2025听to听5 April 2063.听听

If Becky鈥檚听life interest comes to an end听during her lifetime, she is treated as making a potentially exempt transfer (PET)听(IHTM04072)听of the value of the settled property.听听

  • If the PET is made between 6 April 2025 and听5 April听2063, the PET will not be excluded property,听and听will be chargeable if Becky听dies within 7 years,听even if she is not a long-term UK resident at the time of her death. This will听still听be the case if the 7 year听period ends听after听6 April听2063.听

  • If the PET is made after听6 April听2063, it will be a PET of excluded property (as both Preta听the settlor and Becky听the life tenant are听now not long-term UK resident).听听

Example 3听听

Paula made听a qualifying interest in possession听settlement in September 2000听when she was听not domiciled in the UK.听

The life tenant of the settlement is Christie, who is听domiciled听in the UK.听听After 颁丑谤颈蝉迟颈别鈥檚 death, the property is held on discretionary trusts. The property in the settlement is foreign property.听

Paula moves to the听UK听in 2017-18听and obtains a UK domicile.听听

Under the domicile rules听which apply before听6 April 2025, the property听in the settlement is excluded property, as the settlor,听Paula,听was domiciled outside the UK at the time the settlement was made.听听

After 6 April 2025, the foreign settled property is no longer excluded property听because Christie听who is entitled to the qualifying interest in possession is a long-term UK resident.听听

Christie听dies in March 2031. However, because the settled property was excluded property immediately听before听30 October 2024, there is no IHT听charge upon 颁丑谤颈蝉迟颈别鈥檚听death.听听

As Paula听became a long-term UK resident on 6 April 2027听and remains听a long-term UK resident in听2030-31, if the trust continues after 颁丑谤颈蝉迟颈别鈥檚 death, the foreign settled property will not听be excluded property and will be subject to relevant property charges听(IHTM42000).