Changes to the taxation of offshore trusts from 6 April 2017
Changes to the taxation of offshore trusts from 6 April 2017

The following Private Client guidance note provides comprehensive and up to date legal information covering:

  • Changes to the taxation of offshore trusts from 6 April 2017
  • History of developments
  • CGT changes effective from 6 April 2017
  • Income tax changes effective from 6 April 2017
  • IHT and excluded property trusts
  • Practice points
  • Further changes to the taxation of offshore trusts from 6 April 2018

This Practice Note describes the new income tax and capital gains tax (CGT) regime which applies to trusts settled by non-UK domiciliaries prior to becoming deemed domiciled in the UK from 6 April 2017 under section 835BA of the Income Tax Act 2007 (ITA 2007), a new rule introduced by the Finance (No 2) Act 2017 (F(No 2)A 2017). It does not deal with the inheritance tax (IHT) treatment of residential property held through such trusts (for which see Practice Note: IHT on UK residential property held indirectly by non-domiciliaries from 6 April 2017).

For more information on the changes to the deemed domicile rules including a history of the proposals, see Practice Note: Deemed domicile for tax from 6 April 2017.

The broad aim of the proposed changes is to allow deemed domiciliaries who have established non-UK resident trusts before becoming deemed domiciled to continue to be able to roll up the foreign income and all trust and corporate gains tax free. The tax charge for trusts is then restricted to the following:

  1. tax on UK source income where the trust is settlor-interested, eg UK rental income received by the trustees or by an underlying corporate vehicle. The settlor will be chargeable to tax on this income on an arising basis in accordance with current rules

  2. tax on benefits received from the