Commentary

I5.1206 Dual resident settlements

IHT, trusts and estates

I5.1206 Dual resident settlements

I5.1206 Dual resident settlements

Definition of dual resident settlement

A 'dual resident settlement' is one where the trustees are resident in the UK for CGT purposes under the rules in I5.1205 but, under a tie-breaker clause in a double taxation agreement, are treated as resident outside the UK for the provisions of the agreement1.

Difficulties arising for dual resident settlements

Dual resident settlements present a number of difficulties.

Where the other territory is a common law jurisdiction which recognises trusts, it is likely to have different rules for determining whether a trust is resident in its jurisdiction (see I5.1211). For example, a trust may be regarded as resident in a particular jurisdiction if one trustee is resident there during the tax year.

This difficulty is compounded if a territory is a civil law jurisdiction where trusts are not part of the civil law code. For example, the territory may consider that the trust is not a body of persons but merely a number of individuals, each of which is either resident or non-resident in its territory under its normal rules of residence.

Double taxation agreements and dual resident settlements

Where a trust is regarded as resident in another territory and the UK has not concluded a double taxation agreement with that territory, the usual provisions of UK domestic tax law apply.

Where a trust is regarded as resident in a territory with which the UK has a double taxation agreement, the agreement must be examined to determine the tax position of the

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