CIOT publishes HMRC response on deemed domicile trust protections

Released 28 January 2019

The Chartered Institute of Taxation (CIOT) has published HMRC’s response to a technical issue raised on new deemed domicile trust protection rules.

New rules for foreign domiciliaries and non-UK resident trusts were introduced from April 2017 by Finance (No 2) Act 2017 and Finance Act 2018. The rules contain anti-avoidance provisions and protections for settlors of offshore trusts affected by the changes. However, there is a technical defect in the legislation relating to offshore income gains. The CIOT’s June news item Protected trusts and non-reporting funds - help us gather evidence explained the issue that the legislation appears to mean that offshore income gains are not included in the protections. A detailed technical analysis was sent to HMRC. The CIOT has now published HMRC’s response which sets out that HMRC does not consider the trust protections apply to offshore income gains and no statutory change is required. Practitioners need to be aware of the issue and consider what filing position to take for 2017-18 tax returns.

For more information, see Deemed domicile trust protections - HMRC response.

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