Private client

Offshore Trusts

OUR SPECIALIST Private Client SERVICES

If you’re not domiciled in the UK, an offshore trust (non-UK trust) can still offer you UK tax benefits. It can also provide asset protection and a form of living will that allows you to control who benefits from your wealth during your lifetime and after your death.

Our trust experts can support you in structuring your wealth effectively, whether helping to set up an offshore trust, managing an existing structure or responding to beneficiaries’ changing circumstances. This includes:

  • Advising on foreign entities such as anstalts and foundations
  • Computing stockpiled capital gains tax (CGT) pools
  • Dealing with UK tax returns whether for income tax or inheritance tax ten-year charges
  • Assistance with ATED (Annual Tax on Enveloped Dwellings) returns
  • Help using HMRC’s Trust Registration Service
  • Preparing tax returns for beneficiaries to disclose their trust distributions and ensure they are taxed correctly

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If you are not domiciled in the UK, an offshore trust can still offer you UK tax benefits. It can also provide asset protection and a form of living will that allows you to control who benefits from your wealth during your lifetime and after your death.

Inheritance tax

Someone who is not domiciled in the UK will be subject to UK inheritance tax only on their UK assets. This treatment continues until they have been resident in the UK for 15 out of the previous 20 years of assessment, at which point they are treated as if they were domiciled in the UK (“deemed domiciled”) and their worldwide estate is subject to UK inheritance tax.

If such an individual set up an offshore trust to hold their non-UK assets before they became deemed domiciled, these assets would remain out of the scope of IHT. UK assets held by a non-UK company would also be protected. This protection does not apply to UK land and property, whether held by the trustees directly or owned through a non-UK company.

Income tax and capital gains tax

The trustees of an offshore trust would be taxed on UK source income, but otherwise, there is no income tax on non-UK income; nor is there any immediate capital gains tax on anything other than UK property and land. If benefits are paid out of the trust to a beneficiary including the settlor, these benefits are matched first to the income of the trust and then to the capital gains. The beneficiary would be taxed on the benefits if they were resident in the UK but not otherwise. If the beneficiary is a resident but not domiciled or deemed domiciled in the UK, they would only be taxable on benefits conferred in or brought to the UK.

How BKL can help

Our trust experts can support individual clients looking to structure their wealth effectively, whether helping to set up an offshore trust or managing an existing structure.

Not only has trust taxation changed over time but so will the needs of the beneficiaries. What was suitable for the settlor’s children may not work for the settlor’s grandchildren. Beneficiaries can move to other jurisdictions, or marry someone who is a US citizen. We can advise on foreign entities such as anstalts, and foundations and whether they should be treated as trusts.

We can also provide trustees with advice and support with their compliance needs such as computing stockpiled CGT pools and dealing with UK tax returns whether for income tax or inheritance tax ten-year charges, as well as ATED (Annual Tax on Enveloped Dwellings) returns and HMRC’s Trust Registration Service.

We can also prepare tax returns for beneficiaries to disclose their trust distributions and ensure they are taxed correctly.

To find out more, please get in touch using our enquiry form.

NICOLA HALL

BILSHAN MENSAH

Sam Inkersole

In 2022, Sam won the Taxation’s Rising Star award at the Taxation Awards in and was named in the Accountancy Age 35 Under 35.

Jon Wedge

While Jon’s client work focuses on the financial services sector, he also oversees the firm’s assurance service, as well as supporting the trainees following in his footsteps.

ELANA DIMMER

Elana joined us in 2017 as an ACA trainee, after graduating from Durham University where she had studied languages. She is now a manager in our assurance team.

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