Offshore trusts—attribution of gains to settlors—tainting of protected settlements and grandchildren settlements
Produced in partnership with Tolley and Milestone International Tax Partners LLP
Offshore trusts—attribution of gains to settlors—tainting of protected settlements and grandchildren settlements

The following Private Client guidance note Produced in partnership with Tolley and Milestone International Tax Partners LLP provides comprehensive and up to date legal information covering:

  • Offshore trusts—attribution of gains to settlors—tainting of protected settlements and grandchildren settlements
  • Protected settlements
  • Grandchildren's settlements
  • Exceptions to the qualifying settlement rule—when can defined persons benefit?
  • Making the trust non-qualifying

STOP PRESS: This Practice Note is being reviewed in light of the changes introduced by section 35 and Schedule 10 to the Finance Act 2018. For further guidance, see Practice Notes: Finance Act 2018—progress through Parliament and Changes to the taxation of offshore trusts from 6 April 2017.

Under section 86 of the Taxation of Chargeable Gains Act 1992 (TCGA 1992) where a UK resident and domiciled settlor has an 'interest' in a trust and the trust is 'qualifying' for the purposes of the section, gains arising to the trust are attributed to that settlor. For a definition of the terms 'interest' and 'qualifying settlements' under TCGA 1992, s 86, see Practice Note: Offshore trusts—attribution of income to settlors.

When TCGA 1992, s 86 was first enacted the rules did not generally apply to settlements created before 19th March 1991. However, those settlements were brought into charge by satisfying any of the conditions in TCGA 1992, Sch 5. Fulfilling any of these conditions 'tainted' the trust in question. Amendments introduced by section 132 of the Finance Act 1998 (FA 1998) have subsequently applied the TCGA 1992, s 86 rules to all settlements except 'protected settlements' and 'grandchildren's settlements'.

The tainting rules now only apply to determine whether 'protected settlements' and 'grandchildren's settlements' are caught by TCGA 1992, s 86.

Protected