Taxation of non-UK domiciled individuals - non-UK trustsAction required |
The changes to the taxation of non-UK trusts in relation to UK resident, non-UK domiciled beneficiaries probably represent some of the most significant and certainly most complex rules that were introduced by the changes introduced with effect from 6 April 2008.
The good news
Some of the UK tax advantages of the non-UK trust have been preserved. In particular the inheritance tax treatment remains untouched and trustee gains will only be taxed when payments are made out to beneficiaries.
Rebasing and matching
There is an opportunity for trustees to rebase all trust assets as at 6 April 2008 in respect of payments that may be made to UK resident, non-UK domiciled beneficiaries.
This will generally be advantageous but there are positions when a rebasing election will be disadvantageous so advice needs to be taken.
Furthermore complex calculations are likely to be required to determine the benefits or otherwise of a rebasing election and so professional advice should be sought.
The pitfalls
Due to the complexity of the changes some structures may now be inefficient and actually cause tax liabilities to arise. This may be the case for example if interest free loans are in place or trust assets are being used by beneficiaries at no cost.
The opportunities
There are things that can be done though to significantly improve the position! This could range from remedial action to correct now inefficient structures and proactive structuring to enhance existing structures.
The review of an existing structure by our professionals will highlight opportunities to remove double layers of tax that may now exist, restructure parts that are creating unnecessary tax charges and provide a strategy for accessing trust funds efficiently going forward.
Please contact your usual Deloitte private client advisor for more information.
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