IHTM47050 | Long-term UK residence test: Foreign settled property

From 6 April 2025 the excluded property (IHTM04251) status of foreign settled property (IHTM04271) will not depend upon the settlor’s domicile status at the time the assets are added to the settlement.

Instead, assets comprised in a settlement will only be excluded property at times when the settlor is not long-term UK resident (IHTM47000).

For qualifying interest in possession settlements, the circumstances of both the settlor and interest in possession beneficiary are relevant (IHTM47051).

When a settlor is long-term UK resident, any assets they have settled (even if settled when not long-term UK resident or domiciled outside the UK (IHTM13000) will not be excluded property.

This test will apply to all settlements regardless of when the property became comprised in the settlement, subject to the provision for deceased settlors outlined below.

There are also transitional rules to relieve excluded property which was comprised in a settlement at 30 October 2024 from certain charges (IHTM47051).

Deceased settlors

Where the settlor of a trust dies on or after 6 April 2025, the excluded property status of foreign settled property will depend on the settlor’s long-term residence status at their death:

• If they were not long-term UK resident when they died, then foreign settled property will be excluded property for the duration of the trust.

• If they were long-term UK resident when they died, then all UK and non-UK settled assets will be in scope for IHT for the duration of the trust.

Where the settlor of a trust has died before 6 April 2025, foreign settled property will be excluded property based on the old test, which is whether the settlor was not domiciled in the UK at the time the property became comprised in the settlement.

Qualifying interests in possession

In cases where there is an individual entitled to a qualifying interest in possession (IHTM16060) in circumstances which mean they are deemed to own the settled property in which their interest subsists (IHTM16061), there is an additional requirement that the individual entitled to the qualifying interest in possession is not a long-term UK resident (IHTM47051). This requirement does not apply where the settlor of the trust died before 6 April 2025.