Liability to UK inheritance tax “IHT” turns not on residence but on domicile.
An individual is subject to IHT on his/her worldwide assets if s/he is domiciled (or deemed domiciled) in the UK, irrespective of where that individual was resident at the time of their death.
If an individual has a foreign domicile, liability is restricted to UK situs assets, including real estate, net of any allowable deduction for debts. Again, this applies irrespective of that individual’s residence position at the time of their death.
With regard to commercial property, the simplest way for non-doms and offshore trusts to avoid exposure to IHT is to hold the UK assets through offshore holding companies.
Where residential real estate is concerned, corporate ownership is not always the best option as the impact of ATED and NRCGT will also need to be considered. Additionally, the company will not shelter the IHT liability for residential property.
Investors in UK residential property should instead consider the use of loans or life insurance to mitigate any potential IHT liabilities. The effectiveness of existing corporate structures as IHT shelters should also be reviewed.
Contact us here if you would like more advice on your tax affairs.