The growing advantages of offshore trusts for UK non-doms
The growing advantages of offshore trusts for UK non-doms
The role of offshore trusts in the structuring of an individual’s assets could become even more important with the new tax rules for non-UK domiciled individuals (non-doms) which are set to come into effect in April 2017.
It appears there will be tax advantages to holding non-UK property or other foreign assets in offshore structures.
Whilst the technical details of the new rules pertaining to UK non-domiciled individuals are still being worked out and the finer points of the regime won’t be clear until the drafting of the 2017 Finance Bill, it does appear that the UK government is understandably keen to continue to attract international private wealth.
15 year rule
The recent UK budget was reassuring in that it stated that for the first 15 years of being in the UK nothing changes – the same favourable tax rules will apply.
Once the individual has been domiciled in the UK for 15 out of 20 years they will be deemed UK domiciled for tax purposes.
If the individual has acquired an additional nationality but was born in the UK and is living in the UK they will be deemed UK domiciled.
Residential property
UK residential property, held within non-UK trusts or companies, will be subject to inheritance tax. However there will be some protection for those people who had set up offshore trusts before they were domiciled in the UK. They will not be subject to UK tax on income and gains in an offshore trust set up before they became domiciled.
Also trust income and gains that are retained in the trust will not be taxed and excluded property trust inheritance tax rules applying to nom-doms will not change. This means that individuals can protect overseas assets from becoming liable to inheritance tax should they subsequently be deemed domiciled in the UK.
Non-UK assets will be subject to capital gains tax but only on the value increase after April 2017.
Non-UK assets
However it is likely that individuals will be able to protect non-UK assets from UK inheritance tax, tax on income or gains, providing the benefits do not arise whilst the individual is deemed domiciled in the UK.
UK property will be outside of the changes if it is held in a diversely held vehicle.
Guernsey’s trust advantages
Individuals and families who expect to be deemed domiciled in the UK next year may wish to consider setting up a trust in an offshore jurisdiction such as Guernsey before that date.
Guernsey is a popular offshore jurisdiction for the establishment of trusts because the Trusts (Guernsey) Law 2007 is comprehensive and flexible, there is considerable expertise in the establishment of a wide variety of structures and the regulatory environment is robust and widely respected.
A trust involves the separation of the legal title, or ownership, of property from the right to benefit from that property. These structures are used for preservation of both institutional and individual/family private wealth and assets.
Louvre Trust
Louvre Trust also has a network of offices in other leading finance jurisdictions and can advise on a global approach to wealth structuring that is particularly pertinent to international high net worth individuals or families who may be affected by the changes in UK non-doms tax law.