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Taxation: Trusts

Answer

Up to 5 April 2007, separate definitions of trustee residence applied for income tax and capital gains tax.For income tax purposes a trust was a UK resident trust if:"all the trustees were UK resident or""some trustees were UK resident and some trustees were non-UK resident; and""the settlor of the trust was domiciled, resident or ordinarily resident in the UK when the trust was made or assets were added to it."For capital gains tax purposes a trust was a UK resident trust unless:"the general administration of the trust was ordinarily carried on outside the UK and""the trustees or a majority of the trustees were for the time being not resident or not ordinarily resident in the UK."Where the trustees included professional trustees and all the property was provided or derived from property provided by a person who, at the time the property was provided, was domiciled and resident outside the UK, the professional trustees would be deemed not to be UK resident. Where, deeming such trustees to be non-UK resident, all the trustees, or a majority of them, were non-UK resident, the general administration of the trust was deemed to be carried on outside the UK so that the trust was non-resident for capital gains tax purposes.As part of the Trust Modernisation programme, which aimed for a greater consistency of approach between income tax and capital gains tax in relation to the taxation of trusts, a common residence test has been adopted for the purposes of both income tax and tax on chargeable gains.With effect therefore from 6 April 2007, for both income tax and capital gains tax purposes, a trust is treated as resident and ordinarily resident in the UK at any time if:"all the trustees are resident in the UK; or""at least one trustee is resident in the UK, at least one trustee is not resident in the UK and any settlor was resident, ordinarily resident or domiciled in the UK when the trust was made or assets added to it."A trustee who is not resident in the UK 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 United Kingdom through a branch, agency or permanent establishment.The estimate of the expected effect on revenues of this change is negligible.

Secondary information

Type

Written question

Reference

140182; 461 c479-80W

Session

2006-07

Subjects

Taxation Trusts

Link

View this Written question on www.publications.parliament.uk