Inheritance Tax Act 1984 section 48ZA

Excluded property: property situated outside the UK etc

Section 48ZA determines when overseas property held in a settlement (trust) qualifies as excluded property for inheritance tax purposes, replacing the old domicile-based test with the new long-term UK resident test from 6 April 2025.

• Overseas trust property and holdings in UK authorised unit trusts or open-ended investment companies are excluded property if the settlor is alive and not a long-term UK resident, or if the settlor died on or after 6 April 2025 and was not a long-term UK resident immediately before death.
• Where the settlor died before 6 April 2025, the old domicile test still applies: the property is excluded if the settlor was not UK-domiciled when the property first became part of the settlement.
• The excluded property treatment is lost where a beneficiary with a qualifying interest in possession is themselves a long-term UK resident, or where the interest arose from a purchased arrangement made on or after 5 December 2005.
• Anti-avoidance rules prevent excluded property status where arrangements exist involving the acquisition of interests in settled property, and the exemption does not extend to reversionary interests, which fall under the general excluded property rules instead.

---