has announced that, with effect from 6 April
2017, individuals or excluded property trusts
(that is, trusts settled by individuals who are
non-UK domiciled owning UK residential
property through an offshore company) will
pay IHT on the value of the underlying UK
residential property. This will apply regardless of whether the UK residential property is
occupied or let out, and there is no minimum
threshold. Therefore, properties held by
offshore companies or within a trust structure
will no longer have IHT protection.
As a result many individuals now prefer to
hold a property directly and this is likely to
be more popular after 5 April 2017. In this
situation, to mitigate IHT on death a property
may be purchased with a third party mort-
gage to reduce its value in a non-domiciled
individual's estate. Legislation introduced
in 2013, which restricts the deductibility
of liabilities for IHT purposes in certain
circumstances, may limit the effectiveness of
such a strategy where it applies, so acquisitions involving mortgages do need to be
structured correctly. Other options for IHT
mitigation, such as life insurance, may also be
a suitable approach.
The Government has also indicated (in the
technical paper on the proposed changes)
that reliefs from IHT, such as the spouse
exemption, will be available in appropriate
circumstances. There is to be a consultation
at the end of this summer as to the detail of
the proposed changes.
www.theaddressmagazine.com
67