It’s common for non-domiciled individuals to hold UK residential property through an overseas company, meaning 
the individual’s property for Inheritance Tax (IHT) purposes will be in overseas shares. Currently the overseas shares will be treated as excluded property for inheritance tax purposes effectively taking UK residential property outside of the charge to IHT.
The government intends to introduce legislation in the Finance Bill 2017 to bring residential properties situated in the UK within the scope of Inheritance Tax regardless of whether they are held by a non-domiciled individual through an overseas structure. Under the proposed legislation UK residential properties owned indirectly through offshore structures will be removed from the current definitions of excluded property within the Inheritance Tax Act. This will apply whether the overseas structure is owned by an individual or a trust.
The intention behind the changes is to prevent non-domiciled individuals from escaping an inheritance tax charge on UK residential property through the use of an offshore structure like a company or a trust.
In order to address difficulties in identifying whether a chargeable event for IHT purposes has occurred and therefore a liability to IHT arisen, where UK property is owned through an overseas company, it is proposed to give HMRC extended powers to impose the IHT charge on indirectly-held UK residential property so that the property cannot be sold until any outstanding IHT charge is paid.
If you’d like to read more on the subject of property and tax take a look here.
