This Overview focuses on the taxation of the trustees, settlor and beneficiaries of offshore trusts and covers the income tax and capital gains tax (CGT) anti-avoidance legislation concerning settlements contained in Chapter 5 of the Income Tax (Trading and Other Income) Act 2005 (ITTOIA 2005, Pt 5) and Chapter 2 of the Taxation of Chargeable Gains Act 1992 (TCGA 1992, Pt III), as well as the inheritance tax (IHT) treatment of offshore trusts.
There is a wide range of structures that can be used to hold wealth; many use vehicles established outside the UK. The Overseas entity classification—trusts, usufructs and foundations Practice Note discusses how the UK tax system treats foreign entities. Each tax must be considered separately. An entity may be considered a settlement for IHT purposes, but may not be settled property for CGT purposes. UK tax law categorises foreign entities as companies, trusts or partnerships. Companies are opaque, while partnerships are transparent. Trusts are subject to a separate regime.
For general guidance on offshore trusts, see: Offshore trusts—general principles—overview.
An offshore trust is any non-UK resident...
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