The recent UK election and related legislative changes have delayed implementation of new rules imposing inheritance tax on UK residential property held in offshore structures. However, on 13 July 2017, the UK Government announced that the new rules will be included in the next Finance Bill due to be published in September and, importantly, also confirmed that the changes will have retroactive effect from 6 April 2017.
For clients caught by the new ‘15/20 rule’ at 6 April 2017, it may already be too late. However, those who will be caught from the start of the 2018/19 or subsequent tax years are advised to seek advice now to establish what action should be taken to shelter their assets from UK inheritance tax (IHT).
Many clients chose not to ‘de-envelope’ properties held in offshore structures despite the introduction and subsequent increase in the Annual Tax on Enveloped Dwellings (ATED) charge in order to preserve the IHT shelter provided. It has now been confirmed that the protection from IHT will be removed with effect from 6 April 2017. If the primary purpose of an offshore holding company/trust is to provide shelter from UK IHT, then, taking account the ongoing costs of maintenance and the imposition of ATED charges (which can be significant in relation to high value properties), now is the time to consider un-winding or reorganising the structure.
Please contact your usual Harneys contact or one of the below key contacts if you have any questions or would like further advice.