IHTM04299 | Government securities in foreign ownership: conversion to FOTRA gilts and the relevant property trust charge

A charge to tax arises when property (IHTM04030) in a relevant property trust ceases to be relevant property (IHTM04096). Where property in a relevant property trust becomes excluded property (IHTM04251) it ceases to be relevant property, IHTA84/S58 (1)(f) and a charge to tax arises. However, where property ceases to be relevant property by reason only of its investment in FOTRA gilts (IHTM04291), the charge does not apply to such a conversion if :

the chargeable event is on or after 6 April 2025

• The settlor is alive and is not a long-term UK resident;

• The settlor died on or after 6 April 2025 and was not a long-term UK resident immediately before they died; or

• The settlor died before 6 April 2025 and was not domiciled in the UK when the property became comprised in the settlement, or

If the chargeable event was before 6 April 2025 and the settlor was not domiciled in the UK when the property became comprised in the settlement.

See IHTA84/S65 (8) and (8ZA).

From 6 April 1998 onwards, all non-FOTRA gilts issued prior to that date without conditions were deemed to be FOTRA gilts. As a result of this change, it was possible that property held in a relevant property trust could be reclassified as excluded property. FA98/S161 (3) prevents a charge to tax under IHTA84/S65 where it would arise solely because of this change.