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.听
听
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 proceed听as follows听

  • 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) abroad听(transfers before 6 April 2025), IHTA84/S6 (1),听

  • a reversion which is itself comprised听in a settlement (IHTM16042) will be excluded听property:听听

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

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

    • if the settlor鈥痮f the reversion died before 6 April 2025 and was domiciled abroad when the reversion became comprised听in the settlement, IHTA84/S48 (3).听

The situs or locality of a reversionary interest will normally be determined听by the residence of the trustee(s) of the property to which the interest relates.听
听
Example 1

Mr Richer transfers 拢100,000 to trustees in Spain on trust for鈥疎mily for life with remainder听to his wife, Mrs Richer. Some years later, while Emily is alive, Mrs鈥疪icher dies when she is not a long-term UK resident and bequeaths all her estate (including her reversionary interest under her husband鈥檚 settlement) to her son Miles.听
听
Because鈥疢rs Richer鈥檚鈥痠s the settlor's spouse,鈥痶he 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 reversion听is outside the UK听and Mrs Richer听is not a long-term UK resident.
听
Example 2听
The facts are as Example 1 and鈥疢iles sells the inherited reversion to Diego. The latter, also听not a long-term UK resident, immediately听settles the purchased reversion on discretionary trusts.听
听
The reversion now comprised听in Diego鈥檚 settlement, although purchased听by the settlor and therefore outside the protection of IHTA84/S48 (1), is (whilst it remains听a reversionary interest) excluded property in view of听the overseas residence of the trustees of Mr Richer鈥檚 settlement听and 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.听