IHTM44055 | Pre-owned assets: exemptions: foreign element - excluded property prior to 6 April 2025

Where a Pre-owned Asset (POA) charge arises before 6 April 2025, property situated abroad and comprised in a settlement was excluded property if the settlor was non-domiciled at the time the property became comprised in the settlement.

This meant that an individual who was non-domiciled when they created the settlement who later became domiciled or deemed domiciled is not subject to the POA charge on foreign assets in the settlement even if they continue to benefit from them, because they continued to be excluded property and this is disregarded for the purposes of the POA charge FA04/Sch15/Para12(3).

Additions to the settlement after the settlor became UK domiciled or deemed domiciled were not excluded property and so subject to the POA charge in the usual way.

Property which was excluded property comprised within a settlement immediately before 30 October 2024 but which would otherwise have been included in the individual’s estate under the gift with reservation provisions (GWR) will continue to be disregarded for the purposes of the POA charge (see IHTM047061)

In all other cases, on or after 6 April 2025, the settlor’s domicile is not relevant and the POA charge applies to UK resident individuals - with both UK and foreign property, including property comprised in a settlement, if the settlor is long-term UK resident (see IHTM047061).

The definition for excluded property for inheritance purposes includes interests in UK unit trusts, Open-Ended Investment Companies (OEICs) and gilts, but this is not extended to the POA charge.

Holdings in UK Unit Trusts and OEICs may, however, be excluded from the POA charge if they were excluded property comprised within a settlement immediately before 30 October 2024 and would otherwise have been included in the individual’s estate under the gift with reservation (GWR) provisions.