Assets situated outside the UK, and held in a trust set up by a non-UK domiciled settlor, do not attract the usual IHT charges applicable to trusts – the trust has excluded property status.

A long-standing issue has been whether assets have excluded property status if they are added to the trust by the settlor after he becomes deemed domiciled.

HMRC’s interpretation of the legislation is that excluded property status is not available, and this has recently been confirmed by the High Court (Barclays Wealth Trustees (Jersey) Ltd v HMRC).  In that case the assets were transferred out of the trust, but re-introduced by the settlor after he became deemed domiciled.  

However, it is likely that this issue will be appealed as there are different interpretations of the legislation and extra tax at stake.