I have a case where husband and wife owned their residence as Tenants in Common in equal shares.
Husband has died and in his Will he has left his wife a life interest in his half share in the property. The executors and trustees in the Will are his wife and their two children. One child lives and is ordinarily resident in the Netherlands.
My query so far as the trust is concerned is whether there will be any adverse tax consequences as a result of him being a trustee and him not being a UK resident and in particular the Capital Gains Tax position on the eventual sale of the house?
For capital gains tax purposes, in particular on residential property, it is charged based on situs of the asset so for a UK sited property, capital gains tax will be due, irrespective of where the ‘owner’ lives. The Dutch tax position would need to be considered separately, as there may also be a charge there.
Where a non-resident is selling a UK property, they must report and pay the tax within 30 days of completion (and this is true for all sales of residential property from 6 April 2020, even for UK owners).
If the wife lives in the property, wouldn’t PPR be in play?
Provided the trust remains UK tax resident, s.225 TCGA 1992 should apply to relieve any gain during the widow’s occupation.
If the child living in the Netherlands is also entitled to a share in the property following the death of the widow, and the property is sold after her death, there may be Dutch tax issues to consider. I am aware that some jurisdictions look to the original cost of inherited property when assessing tax on a sale by, or on behalf of, a beneficiary. Accordingly, they might seek to clarify the position now and identify if there might be ways to validly manage any potential issue.
The trust will be resident in the UK (see Paul’s reference to an earlier post) and should any dual residence issues arise resolution (under the UK/Dutch DTA) in any event in favour of the UK is most likely.
The only danger is perhaps should the two UK resident trustees die leaving only one trustee namely the Dutch resident individual. Exportation of the trust’s residence would occur with the consequent UK “exportation CGT” charge arising (albeit with CGT private residence relief applying to any gain). However, it would be sensible to always ensure a majority of UK resident trustees.