Currently, UK residential property owned in an offshore structure for a non UK domiciled individual or an overseas investor is regarded as ‘excluded property’ and not subject to Inheritance tax. However, from 6 April 2017, such structures will no longer offer UK residential property the inheritance tax protection that is currently enjoyed. The government is seeking to ‘look through’ such structures and charge inheritance tax regardless of how the property is held.
Full guidance to these new rules has yet to be issued, but with the UK government preoccupied with Brexit you may not be left much time to sort out your affairs. It is expected that the guidance will be provided in the next UK budget.
What we do know is whether you have a flat in Finchley or a mansion in Mayfair there are no applicable reliefs and no minimum valuation threshold. Inheritance tax will apply to all residential properties of any value above available nil rate bands.
If you do not want to be subject to the financial implications of this legislation you could look at purchasing property in a jurisdiction like Jersey that does not have any inheritance tax. Alternatively, you could consider diversifying into UK stocks and shares, or investing in UK commercial property which, when held in an offshore company, is not liable to capital gains tax or inheritance tax.
If you want to know more about how the new rules will affect you email us at mail@alexpicottrust.com
