Trustees - split year

Trusts Discussion
1

I have a client whom I act for in a personal capacity, who left the UK during 2017/18 and will be non UK resident from 31 May 2017. He is also the Trustee of a Trust. The Trust was settled by a non UK domiciled settlor who was also (and remains) non UK resident at the time of the settlement. The Trust was UK resident under s475 ITA2007, as both of the Trustees were UK resident.

Pre FA2013 my understanding was the Residence position of Trustees directly followed the individual trustees, and, therefore, should my Trustee (in the above example) have become non resident, the Trust would have become non resident on the same date.

Following FA2013, Sch39 s41(b) states that 'this part (split year treatment) applies to only a limited extent in determining the residence status of the Trustees of a settlement. It doesn’t appear that s475 ITA2007 gives any provision for splitting the tax year of the Trustees? Does anyone agree? Would the Trust be UK resident for the full tax year of 2017/18?

Would it then follow that the CGT exit charge under s80 TCGA would take place based on the market values of the Trusts assets on 5th April 2018?

Claire Spinks
British Taxpayers

2

You say that there are two trustees both of whom are UK resident. The settlor at the date of creation was non-domiciled and non-resident.

Re CGT:

Under TCGA 1992 s69(2A) the trust is UK resident for 17/18.

TCGA 1992 s.69(2B) cannot be satisfied as the settlor condition is not satisfied.

One of the two trustees left the UK on 31 May 2017. On the basis he was resident for 17/18 you say that from that date split year treatment applies to him for 17/18. However, the trust for 17/18 continues to remain UK resident.

TCGA 1992 s.69(2DA) is inapplicable.

For the tax year 18/19 assuming one trustee is resident and the other has become non-resident (effective 6.4.18) neither s.69(2A) nor s.69(2B) is satisfied and hence the trust is not UK resident under TCGA 1992 s.69(2E).

The consequence is that TCGA 1992 s.80 applies on the trust’s exportation.

If prior to 6.4.18 the individual who has left the UK retires as trustee, leaving only one resident trustee, the trust remains resident and no s.80 charge arises.

Malcolm Finney