Are there any restrictions for a non dom to set up a UK based trust

[kebata]

I am a non dom for IHT purposes for the next 10 years on my overseas assets and have now been resident in the UK for 4 years, but wish to set up a UK based trust with my grandchildren as beneficiaries. The trustees will be UK resident as will the location of the settlement.
I realise the trust will be subject to UK income tax and IHT rules, but I wonder if there might be any other restrictions on me as a non dom establishing such a trust?


Thank you

[maths]

There are no other restrictions (of course as a resident trust its also within CGT).

I would think very carefully before utilising a UK resident trust. It may be the best pragmatic solution but it’s always a shame to give up the possibility of using an excluded property trust for IHT.

The assets to be settled may indicate a bias one way or another.

[kebata]

Thank you for your response and your suggestion that an offshore trust would be more sensible utilising offshore assets. I had not realised I could do this now. Would there be any UK tax implications for me as the settlor or could all gains and income roll up off shore without any immediate UK tax implications? If I extended the beneficiaries to my children and grandchildren, rather than just my grandchildren,and who are all UK resident, would that make a difference to the tax situation?

Thank you.

[AGoodman]

IHT Excluded property status comes from satisfying two conditions:

- non-dom / non-deemed dom settlor at time settlement created/funded
- assets are non-UK situs at time of charge

A UK law trust with UK trustees can satisfy these tests provided the assets are outside the UK.

If you are considering an offshore trust, you need to be funding it with serious monies theses days (at least £1m+ and probably much more to make it worthwhile). (good) Professional trustees are expensive and the administrative burden on you and them grows every year (cf CRS, FATCA and the trust registers in each jurisdiction). You should also be taking regular tax advice as the Govt like to change it in interesting ways.

Also bear in mind that locating the trust offshore could leave some complicated tax issues for your grandchildren if they are in the UK and receive distributions.

Basically, if you have at least £1m to place in trust then take some proper advice before doing anything. If not, offshore is very unlikely to be wise.

Finally, wherever the trust is, you are going to be limited to transferring £325,000 of UK situs assets into trust. Any excess will suffer immediate 20% IHT.

[kebata]

Thank you very much for your help and advice. My course of action is now definitely clearer to me!

[maths]

I'm not in agreement with AG's comments re £1 million being the minimum for an offshore trust.

Any plan would need to involve identifying the domicile status of any children and grandchildren and their residence.

When payments out of any trust are to be made?

In general, what exactly are the future plans regarding any funds settled.

It may be appropriate to set up, for example, an offshore and a UK trust. It my be a good idea to separate a trust for children from a trust for g'children.

Without a detailed discussion definitive advice is not possible.