Offshore trusts and 10 year charge IHT reporting requirement when UK assets less than 80% of NRB

I have a bit of conflicting information on this so want to clarify with members of this forum.

This is with regards to 10 year anniversary charge for a foreign trust whose trustees are non-resident and the settlor is/was not domiciled in the UK. i.e. it is an excluded property trust.

The assets are owned directly by the trustees (rather than by an underlying non-resident company). These are non-residential property assets.

What is HMRC practice on filling of the IHT100 if the UK assets value is less than 80% of nil rate band? Is the account required?

I understand that where the trust falls under excepted settlements than 10-year IHT account is not required if the chargeable event does not exceed 80% of the IHT nil rate band.

Thank you
Sameera Nathoo

In order to qualify under the excepted settlements legislation, one of the criteria is the trustees of the settlement have to have been resident in the UK throughout its existence. Therefore, in your scenario they do not apply, and the 80% test is not relevant.

Duncan McGowan
Rawlinson & Hunter

Thank you Duncan, I agree and understand the criteria for excepted settlements.

I was wondering if HMRC IHT had a special informal compliance burden relief if it was a foreign trust. I saw a mention of ‘not required to file if UK trust assets less than 80% of the Nil Rate Band’ in an older advice (dated 2012) given to the trustees by another tax adviser who is not involved with the trust anymore.

Sameera Nathoo

I had a similar scenario. My conclusion was that there was a requirement to report, but I wrote to HMRC informally, rather than prepare a formal IHT100.
It was in connection with an offshore trust which comprised two separate settlements for IHT (because there were two settlors), each of which comprised partly excluded property and partly relevant property. In the circumstances, the value of relevant property in each IHT settlement was well below the available nil-rate band, so there would have been no IHT to pay. I explained the situation to HMRC and they accepted that and did not require the IHT100s. Indeed, the purpose of the IHT100 is to obtain the relevant information, which I had given them in my letter anyway.

Paul Davidoff
Moon Beever

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I spoke to HMRC IHT technical guy this morning. I have a matter where an offshore trust has £300 worth of relevant UK assets. The overall value of the trust is less than £350k.

The guy told me that it’s up to the trustees to file IHT100 or not. If they think its a low-risk trust and if in future if there were to be an HMRC compliance check/investigation and it was found that IHT was actually due then there would be penalties but if the trustees are SURE that there is no IHT at risk, then it’s up to them to file or not.

He suggested that its better to deliver an account rather than choose not to- even if the trustees are 100% certain no IHT is due. It covers the trustees from any future issues.

He did say that there may have been arrangements in the past to accept simple letters etc but he can’t suggest that is the correct procedure. He is not at liberty to suggest any simpler form of compliance.

Sameera Nathoo