Inheritance Tax Act 1984 Schedule A1 paragraph 5

Disposals and repayments

Paragraph 5 of Schedule A1 deals with the inheritance tax treatment of proceeds and replacement property received when overseas interests that derive value from UK residential property are disposed of or repaid.

• When overseas interests linked to UK residential property (such as holdings in close companies or partnerships) are sold or repaid, the proceeds and any replacement property remain within the scope of inheritance tax for two years
• During this two-year window, the proceeds or replacement property cannot qualify as excluded property under the main excluded property rules, even if the owner is non-UK domiciled or the property is situated overseas
• The non-residents' bank account exemption is also disapplied for the two-year period, so foreign currency account balances representing sale proceeds remain chargeable
• Where proceeds are reinvested into replacement property, the value brought into charge is capped at the value of the original sale consideration or the amount repaid