IHTM04286 - Reversionary interests: reversions and foreign issues

A reversionary interest (IHTM16231) is an item of property, (IHTM04030) separate from the property in which the interest subsists.Ìý
Ìý
If the reversionary interest is itself situated (IHTM27071) outside the UK then, unless the interest is excluded by the main provision in IHTA84/S48 (1), you should proceedÌýas followsÌý

  • an unsettled reversion will be excluded property (IHTM04251) if the transferor is not a long-term UK resident (IHTM47000) (transfers on or after 6 April 2025) or was domiciled (IHTM13000) abroadÌý(transfers before 6 April 2025), IHTA84/S6 (1),Ìý

  • a reversion which is itself comprisedÌýin a settlement (IHTM16042) will be excludedÌýproperty:ÌýÌý

    • at times when the settlor of the reversion is not a long-term UK resident;Ìý

    • if the settlor of the reversion dies on or after 6 April 2025, if they were not a long-term UK resident immediatelyÌýbefore their death; orÌý

    • if the settlor of the reversion died before 6 April 2025 and was domiciled abroad when the reversion became comprisedÌýin the settlement, IHTA84/S48 (3).Ìý

»Ê¹ÚÌåÓýapp situs or locality of a reversionary interest will normally be determinedÌýby the residence of the trustee(s) of the property to which the interest relates.Ìý
Ìý
Example 1

Mr Richer transfers £100,000 to trustees in Spain on trust for Emily for life with remainderÌýto his wife, Mrs Richer. Some years later, while Emily is alive, Mrs Richer dies when she is not a long-term UK resident and bequeaths all her estate (including her reversionary interest under her husband’s settlement) to her son Miles.Ìý
Ìý
Because Mrs Richer’s is the settlor's spouse, the reversion is not excluded from her estate by IHTA84/S48 (1) on her death. But the exclusion provided by IHTA84/S6 (1) applies as both the locality of the reversionÌýis outside the UKÌýand Mrs RicherÌýis not a long-term UK resident.
Ìý
Example 2Ìý
»Ê¹ÚÌåÓýapp facts are as Example 1 and Miles sells the inherited reversion to Diego. »Ê¹ÚÌåÓýapp latter, alsoÌýnot a long-term UK resident, immediatelyÌýsettles the purchased reversion on discretionary trusts.Ìý
Ìý
»Ê¹ÚÌåÓýapp reversion now comprisedÌýin Diego’s settlement, although purchasedÌýby the settlor and therefore outside the protection of IHTA84/S48 (1), is (whilst it remainsÌýa reversionary interest) excluded property in view ofÌýthe overseas residence of the trustees of Mr Richer’s settlementÌýand Diego not being a long-term UK resident. If Diego later became a long-term UK resident, the settled reversion would no longer be excluded property.Ìý