UK CGT tax update

CHANGES TO TRUST RESIDENCE RULES

For UK tax purposes

With effect from 6 April 2007, a non-resident trustee shall be treated as if he were resident in the UK at any time when "he acts as a trustee in the course of a business which he carries on in the UK through a branch, agency or permanent establishment there" See s 692(D) TCGA and s 685E (6) ICTA

If an offshore trust is considered UK Resident it pays tax on the entirety of its income and gains. On top of this, a Capital Gains Tax "exit" charge may be levied when a UK resident becomes non-resident.

It is important to choose an offshore trustee that does not carry on some of their activities through a branch, agency or Permanent Establishment in the UK.

This comes on top of the existing "mind and management test" that challenged offshore trusts to prove that the trust decisions were in fact taken outside the UK.

The dramatic increase in UK property prices over the last decade has made the potential Capital Gains Tax on the sale of these properties a lucrative target for the UK tax authorities (HMRC).

As ASL is not qualified to give tax advice, we strongly recommend that you obtain proper UK tax advice on this matter as this is a complicated part of the tax law. The HMRC guideline states, "the answer depends on the facts in each particular case".