ARTICLE · 26 OCTOBER 2022

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Offshore Structures, Inheritance Tax, And The "Sting In The Tail"

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Historically, non-UK domiciled individuals would often choose to hold UK real estate through an offshore company (which may, in turn, have been held by offshore trustees) in order to avoid a charge...

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Historically, non-UK domiciled individuals would often choose to hold UK real estate through an offshore company (which may, in turn, have been held by offshore trustees) in order to avoid a charge to UK inheritance tax ("IHT") on that real estate.

The shares in such an offshore company were non-UK situs assets for the purposes of UK IHT and were therefore classified as 'excluded property' in the hands of the non-UK domiciled individual or trustees. There was no look-through to the underlying UK real estate.

However, changes to the legislation, which became effective from 6 April 2017, now bring all UK residential property whether held directly or indirectly within the scope of UK IHT. The legislation also brings certain loans used to purchase UK residential property within the charge to IHT.

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