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Inheritance Tax Changes To Offshore Trusts
Section 48 Inheritance Tax Act 1984 provides that where property comprised in a settlement is situated offshore then that property will be excluded property unless the settlor was domiciled in the UK at the time the settlement was made.
What this means is that individuals who are not domiciled in the UK are able to set trusts up before becoming so domiciled and those assets are permanently outside the scope of UK inheritance tax provided they remain held outside of the UK.
Whilst HM revenue and Customs have always taken the view that an addition to a settlement would be considered, for these purposes, to be a new settlement, this view has not been universally accepted by professional advisers.
The Chancellor announced at the time of the last Budget that this rule would be changed to bring legislation in line with HM revenue and Customs’ Views, and the draft Finance Bill provisions confirm this.
Whilst the new legislation would not become law until the Finance Bill receives Royal assent, once in place, it will be deemed to have always been in place.
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Posted on 16th May 2022
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