Q&As

A UK resident and domiciled settlor of a settlor interested trust is taxed on the income and gains of the trust and its underlying offshore company as they arise. Is the settlor also taxed on a dividend paid by the company to the trust? Is there any provision to suggest the dividend would not be taxable?

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Produced in partnership with Paul Davies of Clarke Willmott
Published on LexisPSL on 03/09/2019

The following Private Client Q&A produced in partnership with Paul Davies of Clarke Willmott provides comprehensive and up to date legal information covering:

  • A UK resident and domiciled settlor of a settlor interested trust is taxed on the income and gains of the trust and its underlying offshore company as they arise. Is the settlor also taxed on a dividend paid by the company to the trust? Is there any provision to suggest the dividend would not be taxable?

A UK resident and domiciled settlor of a settlor interested trust is taxed on the income and gains of the trust and its underlying offshore company as they arise. Is the settlor also taxed on a dividend paid by the company to the trust? Is there any provision to suggest the dividend would not be taxable?

The question pre-supposes that the income and gains of the company are taxable on the settlor under the anti-avoidance legislation applicable to transfers of assets abroad. This will happen if the settlor or their spouse (or both) are able to benefit from the trust. In practice, this was rare, but is now less so because of the rules for ‘formerly domiciled residents’ introduced in the Finance Act 2017.

Under the transfer of assets abroad rules, relief from a double charge to income tax is given where the transferor subsequently receives income

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