Mr. B, a French citizen living in France, is the owner of some art works located in several UK galleries and museums. As the value of the art works would exceed the inheritance tax threshold for UK inheritance tax purposes if he should die soon, Mr. B wants to know how he can avoid exposure to UK inheritance tax.
If he died while owning the works of art in the UK, then UK inheritance tax liability would certainly arise. An effective way to avoid this eventuality would be to create an offshore trust in a location such as the Isle of Man. The offshore trustees can then set up an offshore company that would take ownership of the art. By establishing this two-tier structure, the art can be brought into the UK and stay there without any exposure to UK inheritance tax, as the trust property will consist of the shares in the offshore company. Therefore, for UK tax purposes, these shares are exempt property, as they are situated outside the UK.