Offshore trusts—capital payments to UK resident non-domiciliaries and applicable reliefs
Offshore trusts—capital payments to UK resident non-domiciliaries and applicable reliefs

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

  • Offshore trusts—capital payments to UK resident non-domiciliaries and applicable reliefs
  • Rebasing
  • Conditions for a rebasing election to be made
  • Advantages and disadvantages of an election
  • Calculation of the relief
  • Rebasing and remittance
  • Exemption of pre-6 April 2008 capital payments and s 1(3) amounts
  • Capital payments between 12 March and 5 April 2008
  • Trust beneficiaries and the remittance basis
  • Meaning of 'remittance'

As discussed in the UK resident non-domiciliaries—tax planning Practice Note, non-domiciled individuals resident in the UK can claim to be taxed on the remittance basis. This means that only their UK source income and gains and the foreign income and gains they remit to the UK are subject to UK taxation. Remittance basis users are therefore exempt from UK tax on foreign earnings that are kept outside the UK.

Until 6 April 2008, UK resident non-domiciled individuals were not taxed under section 87 or Schedule 4C of the Taxation of Chargeable Gains Act 1992 (TCGA 1992). In effect this meant that trust gains could be remitted to the UK by a beneficiary free of UK tax. This was amended with the introduction of Finance Act 2008 (FA 2008) though the scope of changes is limited by the reliefs afforded to non-domiciliaries. This Practice Note summarises the conditions for three main reliefs which are:

  1. rebasing election

  2. exemption of pre-6 April 2008 capital payments and TCGA 1992, s 1(3) (formerly known as 2(2)) amounts, and

  3. the remittance basis

In this Practice Note, the term ‘capital payments’ means payments subject to TCGA 1992, s 87 or Sch 4C.

Rebasing

The rebasing election does not allow 'rebasing' of all the trust assets. Rather it restricts the amount of s 87 or Sch 4C gains arising to a trust that can be

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