UK taxation of offshore trusts—income tax and capital gains tax
Produced in partnership with Jenny Wilson-Smith and Emma Haley of Boodle Hatfield
UK taxation of offshore trusts—income tax and capital gains tax

The following Private Client guidance note Produced in partnership with Jenny Wilson-Smith and Emma Haley of Boodle Hatfield provides comprehensive and up to date legal information covering:

  • UK taxation of offshore trusts—income tax and capital gains tax
  • Protected settlements
  • Income tax
  • Capital gains tax (CGT)

An offshore trust is any non-UK resident trust. The trustees of offshore trusts have limited exposure to UK taxes and if they are resident in a no or low tax jurisdiction, may also have limited exposure to foreign taxes. However, UK anti-avoidance provisions can instead attribute the income and/or gains of the trust to the settlor and/or beneficiaries and so impose income tax and/or capital gains tax (CGT) on them.

The taxation of offshore trust income changed significantly from 6 April 2017 following changes made by Schedule 5 to the Finance (No 2) Act 2017. The taxation of trust gains was also changed, although to a lesser extent by the same legislation from 6 April 2017.

In addition, Schedule 10 to the Finance Act 2018 which took effect from 6 April 2018 introduced certain anti-avoidance provisions applicable to offshore trusts. For background information on all these changes, see Practice Note: Changes to the taxation of offshore trusts from 6 April 2017.

This Practice Note focuses on trusts established as wealth planning vehicles for individuals. Where a trust is used to avoid tax on UK business income, other tax regimes may apply. For example, see Practice Notes: Profit fragmentation and tax avoidance and Offshore receipts in respect of intangible property.

Protected settlements

A ‘protected settlement’ is an offshore settlement created by a non-UK domiciled