Additions to NZ trust to avoid IHT? USERNAME:arob
Tax Question: I hold a NZ family trust and am considering purchasing a property in the UK. This was established when I was not domiciled in the UK but I am now domiciled here. I understand that UK property will therefore not meet excluded property status and therefore be liable to IHT (unlike NZ property). It has been suggested that I hold any UK property in a NZ overseas company to maintain excluded property status and legally avoid IHT. Would this overseas company need to be in place prior to any purchase of UK assets by the NZ trust or could the NZ trust purchase UK assets as it currently stands and then be restructured in NZ without incurring UK IHT liability as a result of the temporary holding of the UK property in the NZ trust? Answer: The trust qualifies for excluded property status to the the extent that it held foreign property whilst you were non UK domiciled. The fact that you have acquired a UK domicile would not impact on the IHT treatment of any foreign property held in the trust and this would therefore be outside the UK IHT regime for trusts. However, after you have acquired a UK domicile you could not then add property to the trust and benefit from the excluded property status. The purchase of any foreign property by the trust (ie additions of foreign property to the trust by you) would be within the scope of UK IHT for the trust. Therefore if you purchased UK property this would clearly be subject to UK. However, so would any foreign property (such as shares in an offshore company owning the UK property) given you are now a UK domiciliary.
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