IHTM04291 | Government securities in foreign ownership: introduction

‘Government securities’ is a term we use to describe securities issued by the Treasury. These are also known as ‘gilts’. The Treasury can issue, and has issued, securities which are exempt from UK taxation so long as they are in the beneficial ownership of persons who satisfy the conditions attached (usually that the person is not resident or ordinarily resident in the UK). Securities issued with this condition are known as FOTRA (Free of Tax to Residents Abroad) gilts.

Gilts are excluded property for inheritance tax purposes if they are in the beneficial ownership of a person who satisfies the conditions on which the gilt is issued by the Treasury. Where the security is settled property, the beneficiary or beneficiaries concerned must satisfy the conditions.

For chargeable events on or after 6 April 2025, all FOTRA securities, whenever issued, are treated as though no domicile condition were included in the requirements.

The precise terms of the conditions are set out in the prospectus under which the gilts were issued. In general:

• gilts issued with conditions after April 2013 require the beneficial owner to be non-resident (IHTM13025)

• gilts issued with conditions between April 1998 and April 2013 require the beneficial owner to be ordinarily resident (IHTM13025) outside the UK

• gilts issued before April 1996 require the beneficial owner to be domiciled (IHTM13000) and ordinarily resident outside the UK, so if the chargeable event is before 6 April 2025 that domicile condition will remain relevant.

On 6 April 1998, gilts which were issued before that date without conditions were converted to be FOTRA securities with a condition that the beneficial owner is ordinarily resident outside the UK. They will be therefore be excluded property for chargeable events on or after 6 April 1998, but not if the chargeable event was before this.

However 3½% War Loan Stock issued in 1952 or later was not so converted and the beneficial owner had to be both ordinarily resident and domiciled outside the UK, and the additional domicile condition continued to apply to deaths or other chargeable events. This stock was fully redeemed on 9 March 2015.