Background
IHT is charged on the worldwide assets of someone who is domiciled in the UK, and on the UK assets of someone who is domiciled abroad. Similarly, property situated abroad and held in a trust that was set up by someone who was domiciled abroad is excluded from charge, whereas UK assets owned by such a trust are subject to IHT.
Foreign domiciled individuals and the trusts created by them may therefore consider using borrowing when acquiring UK real estate, particularly where residential property will be occupied by the individual or their family. Borrowing is now more likely because the alternative strategy to mitigate IHT by property ownership through a corporate structure may trigger the new annual tax on enveloped dwellings and potentially also capital gains tax.
The arrangements
R is domiciled abroad and wishes to buy a valuable house in the UK for his occupation. He has a number of options:
- Ìý
(1)ÌýÌýÌýÌý R buys the house in his own name, using his own cash resources to fund the purchase.
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Web page updated on 17 Mar 2025 17:18