InheritanceTax: Avoidance Using Offshore Trusts

The measure

Non-UK domiciled individuals who settle foreign assets into trust ("excluded property" trusts) can normally benefit from an inheritance tax (IHT) exemption in relation to those assets. The Government is targeting IHT avoidance schemes where UK domiciled individuals acquire an interest in a pre-existing excluded property trust in an attempt to secure IHT benefits similar to those enjoyed by non-UK domiciled settlors.

The new measures will ensure that assets acquired by a UK domiciled individual in this manner will be treated as if they were, at the point of acquisition, transferred by them to a UK trust. This will mean that, on acquiring an interest in settled assets, the reduction in value of the UK domiciled individual's estate is immediately chargeable to IHT and the settled property is subject to periodic and exit charges.