Plans to tax UK residents on payments from offshore trusts are being seriously reconsidered by the UK government due to fears that wealthy foreigners might consider leaving the UK.
Deemed UK domiciled Settlors would have been taxed on all the gains of an offshore trust once they or a close family member had received benefit from the trust. The proposal meant that offshore trusts would lose their tax exempt status if any benefits were paid out which is in direct conflict with earlier promises confirmed at the 2015 Summer Budget that offshore trusts would not be touched. It has been stressed that the Treasury seeks a tax system that balances fairness with international competitiveness, which most advisors have considered the proposal too excessive and not in the interest of international competitiveness.
Alternative proposals have been set out and are being considered by the Treasury although some critics are saying that these are not sufficient and further concessions are needed. Despite the uncertainty surrounding this area at present UK domiciled individuals will need to give very careful consideration to the new non-dom tax rules when establishing a trust or adding property to an existing trust once the Finance Bill 2017 comes into effect.