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Background

IHT is charged by reference to a taxpayer's domicile. If a taxpayer is UK domiciled, their worldwide estate is subject to inheritance tax at death or on lifetime transfers. However, a number of specific statutory exemptions and reliefs mean that inheritance tax is often not charged on transfers of wealth. The most obvious is the exemption on transfers of property between spouses and civil partners. Another is the exemption on outright lifetime gifts to individuals provided the donor survives seven years and does not receive any benefit from the gifted property in the seven years prior to his death. Gifts into trust are generally taxed less favourably and in particular may be subject to an immediate entry charge of 20%.

On the other hand, if the taxpayer is neither domiciled nor deemed domiciled in any part of the UK, only transfers of assets situate in the UK are subject to inheritance tax (subject generally to the same exemptions as apply to a UK domiciliary). As far as settled property is concerned, if such