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Where Taxpayers and Advisers Meet

Liechenstein trust and distribution

Yiannis17
Posts:133
Joined:Wed Aug 06, 2008 3:43 pm
Liechenstein trust and distribution

Postby Yiannis17 » Sat Feb 09, 2019 11:49 am

Good morning

I have a situation where a trust registered in liechenstein has distributed all the funds, a large amount, to the beneficiary who is is non UK domicile but was UK resident for part of 2018/19. This is the difficult point because he is stating that he became Non resident at the time the trust made the distribution and I do know that he is now living back in Europe after about 5.5 years in the UK. So the actual date needs to be established.

Basically what is the situation if he was resident in the UK at the time of distribution and when also if he was not resident.

The matter is further complicated as to date he has not prepared any UK tax returns. And I am considering whether to register him.

Also where does one stand with the exchange of information and disclosure requirements?

Thank you.

AGoodman
Posts:1738
Joined:Fri May 16, 2014 3:47 pm

Re: Liechenstein trust and distribution

Postby AGoodman » Mon Feb 11, 2019 11:39 am

Assuming he was not a settlor of the trust, the main taxes to be concerned about are:

1. Income tax if he received any actual income from the trust
2. Income tax under transfer of assets abroad rules if any income had been accumulated within the trust or subsidiaries.
3. s.87 TCGA for any capital gains accumulated within the trust, including the deemed disposal if any assets were distributed in specie.
4. The trust could also be subject to an IHT exit charge but this is only likely if the settlor was UK dom when adding assets or the assets themselves were UK situs.

All 1-3 can be subject to the remittance basis if he (a) made/makes the election (b) keeps the distribution out of the UK and (c) the trust income was foreign source.

Split year treatment could (I believe) apply to (1) but does not apply to (2) or (3) so he could be caught for them if he was UK resident for the tax year when the distribution took place.

Normal self-assessment rules apply for disclosure. Liechtenstein is party to CRS and the trust may have been disclosed under the UK/Liechtenstein tax agreement (which led to the LDF regime).

Yiannis17
Posts:133
Joined:Wed Aug 06, 2008 3:43 pm

Re: Liechenstein trust and distribution

Postby Yiannis17 » Mon Feb 11, 2019 11:52 am

Thank you for your response. Much appreciated.

I have just found out that the income was submitted to the UK now to purchase a UK property.

Yiannis17
Posts:133
Joined:Wed Aug 06, 2008 3:43 pm

Re: Liechenstein trust and distribution

Postby Yiannis17 » Thu Feb 14, 2019 2:03 pm

Afternoon

Coming back to my original question, I have established that the distribution of capital (no income) was made to the settlor of the trust. He was also UK resident at the time of this distribution.

My understanding is there will not be tax liability on the distribution?

Thank you


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