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. 
 
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 as follows 

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

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

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

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

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

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

Mr Richer transfers £100,000 to trustees in Spain on trust for Emily for life with remainder to 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. 
 
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 reversion is outside the UK and Mrs Richer is not a long-term UK resident.
 
Example 2 
The facts are as Example 1 and Miles sells the inherited reversion to Diego. The latter, also not a long-term UK resident, immediately settles the purchased reversion on discretionary trusts. 
 
The reversion now comprised in Diego’s settlement, although purchased by the settlor and therefore outside the protection of IHTA84/S48 (1), is (whilst it remains a reversionary interest) excluded property in view of the overseas residence of the trustees of Mr Richer’s settlement 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.