How do I take the value of a foreign property out of my estate for IHT purposes

If a person is born in the UK – they have a UK domicile of origin. If they have been living in the UK for 15 out of the last 20 years, they are classified as deemed UK domicile and so their worldwide assets are liable for UK inheritance tax.

Table of contents

This article is specifically for people who hold offshore properties but are potentially liable for UK inheritance tax.

If a person is born in the UK – they have a UK domicile of origin.  If they have been living in the UK for 15 out of the last 20 years, they are classified as deemed UK domicile and so their worldwide assets are liable for UK inheritance tax.

Sometimes, when there are offshore assets held, there will be double taxation agreements where part of the inheritance tax in the country where the assets are held. This offshore tax will then reduce the amount of tax payable to the UK.

Generally, inheritance tax in the UK is higher than anywhere else in the world so there will be additional tax to pay of 40% to the government.

You could put property into a trust during your lifetime but there are a few issues you need to be aware of.

If there is rental income coming from the property, the income tax issues in the country where the property is held can become complicated if the property is owned by a trust. There are also many countries like France, Spain, Italy, which simply don’t recognise trusts and therefore this type of planning will not work at all.

It is possible to put all foreign property into a UK company or even better – a UK Family Investment Company.

All countries in the world recognise companies. You still need to be aware of the taxation issues arising in the country where the property is held and how this may impact your UK company. We are able to help you with the UK company but we can’t be experts on tax in every single country in the world.

The shares of your Family Investment Company in the UK can be given away directly to your children or to an Employee Benefit Trust if there are large Capital Gains Tax issues on the gifts of any of those shares. The gifts of the shares will reduce the value of your estate and the inheritance tax payable and because the company owns the property, it’s going to reduce the overall tax by disallowing the value of the property in the company because the shares of the company have been given away.

If you don’t want to go down the route of Family Investment Companies, you could take a mortgage out against your foreign property. You can take the mortgage money that you have extracted and you can gift that money into a trust in the UK or gift it to a company/ Family Investment Company or directly to your children.

Last case scenario, you could sell the property and use the money to gift into trust or company or directly to your children.

Join our Newsletter

Subscribe and get the latest updates about inheritance tax and Estate Planning into your mailbox.

We help people with over £1 million in current assets pay ZERO in UK inheritance tax

One stop comprehensive specialist advice - Tax, financial planning and legal advice service with 18 years experience.

What our clients say
Read our 118
    
reviews

"It is gratifying to finally come across an adviser who gives sensible ongoing advice which is very client focused."

Frank Hibberd

Retired gentleman

"It is nice to know that we can now be certain that our daughter will inherit our money without giving a large slice of it to the government ."

Tony & Sue Perriss

"Everyone's situation is different but having an initial discussion with Charles has really helped me personally navigate what can be a daunting subject."

Bobby Chadda

"I particularly want to thank you for the open and transparent manner in which you have serviced my tax planning needs since I first met you seven or so years ago. In arranging my tax planning through you, I have confidence"

Michael Mahon

Retired gentleman

"Charles was really helpful from the outset and quickly clarified our situation for us... I have used Bluebond for  IHT and other tax advice and they have been very helpful with both. Charles is a very experienced and knowledgeable individual and I highly recommend Bluebond's services."

Sam Attenborough

Retired gentleman

I have used Bluebond for setting up a discretionary trust for my children as well as inheritance tax and estate planning for my home and  other properties. Having searched for years, it was only after meeting and speaking with Charles that I felt confident enough to take these next steps, and I'm very glad I did. His ability to explain complex issues in simple terms and walk you through every step of the process is quite simply unparalleled.

Imran Qureshi

Excellent and comprehensive advice concerning all things financial in one place. Enthusiastic, Educational, Expert, value oriented, Professional and Polite are adjectives that come to mind as well as great attention to detail.

Deirdre Buckley

Inheritance tax is a minefield. Charles de Lastic of Bluebond Tax Planning is the best in the business at helping you to chart the path that is right for you to ensure your estate is structured in the most tax efficient manner.

Nicholas Dickinson

Charles provides clients with valuable insights that clearly demonstrate expertise built over the years. Charles and his team guided us through a estate planning journey and then addressing complex Inheritance Tax matters. They have been very transparent with their advice and cost. Overall an excellent service. Highly recommended

Shailesh Karia

The information contained in this web site is for UK consumers only.  Like most firms of solicitors and accountants, Bluebond Tax Planning is not regulated by the FCA. The content of this website does not constitute FCA regulated financial advice and all content is provided for general information purposes only. Bluebond is not responsible for any action you may take as a result of information on this site. All advice will be delivered on a personal basis once we fully understand your situation and our client agreements have been signed.

Copyright © 2024 Bluebond.co.uk
-
Copyright Notice
-
Legal Disclaimer
-
Terms & Conditions
-
Privacy Policy