Foundations

A private foundation is a legal entity set up by an individual, a family or a group of individuals, for the benefit of the founders. A foundation can also have charitable or philanthropic purposes. It has long been associated with civil law jurisdictions, most notably Liechtenstein (but also Austria, Switzerland, Panama, St Kitts, Seychelles, Nevis, Anguilla, Malta, Curaçao and the Netherlands Antilles) and less frequently in common law countries such as the Bahamas (introduced in 2004). Recent years have also seen common law jurisdictions such as Jersey, the Isle of Man, Guernsey and Mauritius introduce legislation allowing the establishment of foundations.

Furthermore, in 2018 the Dubai International Financial Centre (DIFC) introduced the Foundations Law DIFC Law No. 3 of 2018 (as amended) (Foundations Law). The Foundations Law was the subject of an important decision in 2020, by the Court of Appeal of the DIFC on the interpretation of the statutory regimes in the DIFC governing trusts and foundations. See News Analysis: DIFC Court of Appeal gives pioneering advisory judgment on trusts and foundations regimes.

General information

Foundations have their origins in civil law countries. An early forerunner

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All in? Court confirms when a settlement is 'made' for the purposes of excluded property (Accuro Trust (Switzerland) SA v The Commissioners for HMRC)

Private Client analysis: This case considered the meaning of 'relevant property' under the settlements regime of the Inheritance Tax Act 1984 (IHTA 1984) and, in particular, the time at which this definition is to be tested. The question arose as to whether the trustees of an offshore trust established by a non-UK domiciled settlor were subject to the UK settlements regime in respect of property added to the trust after the settlor became deemed domiciled in the UK, or whether they were exempt from such charges as the trust consisted solely of excluded property. The First-tier Tribunal (FTT) held that whether trust property is excluded property is based on the status of the trust at the time that it was established, not at the time that the property in question was added to the settlement. As a result, the trust in this case did consist solely of excluded property and no inheritance tax (IHT) charges arose as a result of either the ten-year anniversary or capital distributions. The FTT was also asked to consider whether their jurisdiction was appellate, or supervisory only. The FTT held that, while their jurisdiction was supervisory, the questions raised by the trustees were relevant in establishing whether HMRC had acted reasonably and that the outcome (ie that the paid IHT should be refunded and that no further IHT was due) would be the same in either case. Written by Katherine Willmott, senior associate solicitor at Foot Anstey LLP.

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