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Matthew Hutton MA, CTA (fellow), AIIT, TEP, presenter of Monthly Tax Review (MTR), outlines a potential problem arising from the statutory rules for trustee residence.

Context

In 2007/08 the statutory rule for trustee residence was aligned with income tax (TCGA 1992 s 69 as amended).  Hitherto a body of trustees was treated as being UK resident and ordinarily resident unless:

(a) the general administration of the trust was ordinarily carried on outside the UK; and

(b) the trustees or a majority of them for the time being were not resident or ordinarily resident in the UK.

From 2007/08, if all the trustees are personally UK resident, the trustees as a body are UK resident. If they are all personally non-UK resident, the trustees as a whole are non-UK resident.  Where that is not the case, the residence of the trustees as a body depends upon the status of the settlor. Where the settlor was resident, ordinarily resident or domiciled in the UK at any relevant time (broadly, when he made the settlement, whether inter vivos or on death), then if at least one trustee is resident in the UK they are all treated as so resident. If the settlor was resident ordinarily resident and domiciled outside the UK, then if at least one trustee is resident outside the UK they are all treated as non-UK resident (ITA 2007 ss 474-476).

A real live example

The trust in question was created by a settlor who was resident, ordinarily resident and domiciled outside the UK. There had always been at least one non-UK resident trustee, but with a majority of UK resident trustees and UK administration. Up to and including 2006/07 therefore the trust was non-UK resident for income tax purposes but UK resident for CGT purposes. On 6 April 2007 the trustees would have become non-UK resident for CGT purposes also, notwithstanding that a majority of the trustees continued to be UK resident and the administration continued to be undertaken in the UK. This therefore constituted an emigration of the trust, triggering a charge under TCGA 1992 s80. The only relieving provision (s81) does not help, as that operates only on the death of a trustee in circumstances where s80 is triggered and within six months thereafter the trustees become resident and ordinarily resident in the UK.

The HMRC response

The point was put to HMRC who confirmed the position and advised that there is no alleviating treatment. The point is more likely to have caught non-professional trustees unawares. Presumably HMRC’s position would be that there was a year or so between announcement and the effective date of the new rule during which action could have been taken, in this case for all the non-UK resident trustees to retire in favour of UK residents.

(Contribution by Barry Adamson of Maclay Murray & Spens LLP)

It could still happen

Consider a trust made by a non-UK resident non-UK domiciled settlor, with one UK resident and two UK resident trustees. The UK resident trustee retires to France …

What is MTR?

MTR is a 90 minute monthly training course, held in London, Ipswich and Norwich – as well as a reference work. Each Issue records the most significant tax developments over a wide range of subjects (see below) during the previous month, containing 30 to 40 items. The aim is not necessarily to take the place of the journals, but rather to provide an easily digestible summary of them and, through the six-monthly Indexes, to build up, over the years, a useful reference work. 

The first aim, therefore, of MTR is to inform. The second and subsidiary aim is to provide a monthly forum for the discussion of issues that tend to come up in professional practice, largely, though not exclusively, prompted by specific items in MTR.

Who should come to MTR? Does it attract CPD?

MTR is designed not primarily for the person who spends 100% of his/her time on tax, but rather for the practitioner (whether private client or company/commercial) for whom tax issues form part of his/her practice. Attendance at MTR qualifies for 1.5 CPD hours for members of the Law Society, for 1.5 CPD points for accountants (if MTR is considered relevant to the delegate’s practice) and (subject to the individual’s self-certification) should also count towards training requirements for the CIOT. For STEP purposes, MTR qualifies for CPD in principle, on the grounds that at least 50% of the content is trust and estate related.  
 
What is the content of MTR?

The material is drawn from HMRC press releases, Tax Bulletins, VAT business briefs, case reports and articles in the professional press.   Each item carries a reference as to source which can be followed up if necessary. 

The logic of the ordering of the 12 sections is as follows: first, Capital Taxation (viz 1. Capital Gains Tax, 2. Inheritance Tax and 3. Stamp Taxes).  Second, Personal Tax (4. Personal Income Tax).  Third, Business Related Matters (viz, 5. Business Tax, 6. Employment, 7. National Insurance and 8. VAT & Customs Duties). And fourth, Miscellaneous (viz 9. Compliance, 10. Administration, 11. European and International and 12. Residue). An annual binder is provided within the subscription cost.

Despite an inevitable element of selectivity, MTR aims to be catholic in its coverage – and this is reflected in the presentations where appropriate: there may well be NI, VAT or employment tax points of which the person advising mainly on estate planning (for example) should at least be aware. That said, the London sessions at least tend to focus, by majority request, on estate planning issues: it is possible that in future one of the sessions might be geared more to company/commercial matters. 

How is MTR circulated?

The Notes are emailed to each delegate in the week before the presentations (and thus can easily be circulated around the office), with a follow-up four or five pages of practical Points Arising during the various sessions (whether in London, Ipswich or Norwich).

When and where is MTR held?

The London meetings take place at the National Liberal Club, One Whitehall Place, London SW1, on either the first or second Tuesday of the month, generally in the David Lloyd George Room. There is a choice of four sessions: 9.00 - 10.30 (3 places available), 11.00 – 12.30 (6 places available), 1.00 – 2.30 (8 places available) and 4.00 – 5.30 (3 places available).

The Ipswich meetings take place generally on the first or second Wednesday of the month at the offices of Pretty’s solicitors 45 Elm Street, Ipswich 5.00 – 6.30pm (5 places available). 

The Norwich meetings take place at the Norfolk Club, Upper King Street, Norwich on the first or second Thursday of the month from 5.30 – 7.00pm (3 places available). 

Dates are fixed up to a year in advance and any one delegate from a firm can take up the firm’s place each month. Attendance is limited to no more than 30 delegates in London and 25 delegates in Ipswich and Norwich (to make for ease of round table discussion). The cost in London is £60 plus VAT, and in Ipswich and Norwich £50 plus VAT (billed every six months in advance).

How do I find out more?

For further details, visit www.matthewhutton.co.uk on Conferences & Seminars and then Monthly Tax Review – or email Matthew on mhutton@paston.co.uk.

Matthew Hutton

For those whose firms unable to make the monthly seminars but wishing to order MTR as 'Notes Only' (at £180 per annum for the 12 issues, invoiced six-monthly in advance), visit  our sister site, TaxBookShop.com: Monthly Tax Review Notes