Taxation of offshore trusts—non-domiciled and deemed domiciled settlors
Taxation of offshore trusts—non-domiciled and deemed domiciled settlors

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

  • Taxation of offshore trusts—non-domiciled and deemed domiciled settlors
  • Significance of settlor’s domicile for offshore trusts
  • Settlements code
  • Transfer of assets abroad code
  • CGT and TCGA 1992, s 86
  • CGT and TCGA 1992, s 87

Significance of settlor’s domicile for offshore trusts

The extent of a trust’s liability to UK income tax and capital gains tax (CGT) depends on the residence status of its trustees. Non-resident trusts can, in certain circumstances, shelter non-UK income and gains. See Practice Note: Tax position of non-resident trusts.

The domicile status of a UK-resident settlor is probably the most significant factor in determining the extent to which the income and gains of a non-resident trust are subject to UK tax. This Practice Note summarises the current position under the settlements code, transfer of assets abroad code, and the CGT rules set out in sections 86 and 87 of the Taxation of Chargeable Gains Act 1992 (TCGA 1992) in relation to settlors who are not UK-domiciled, as well as those who have acquired deemed domicile status.

Individuals may acquire a UK deemed domicile for income and CGT purposes under the conditions set out in either ‘Condition A’ or ‘Condition B’ as described below. For a summary of the rules on deemed domicile that apply after 5 April 2018, see Practice Note: Deemed domicile for tax from 6 April 2017.

Condition A deemed domicile

An individual, P, is deemed domiciled in the UK under Condition A, if P:

  1. was born in the UK

  2. had a UK domicile of origin, and

  3. is a resident