I would appreciate members views please in respect of UK compliance for the following scenario. Depending upon complexity, suggestions for an adviser (bearing in mind that the assets and income involved are of low value) would also be appreciated.
By way of background:
A. Our client is a New Zealand national, who has been living in England for the last 4 years under an ancestry visa. She is not clear whether she will return to New Zealand.
B. As is common in New Zealand, she is one of the settlors, one of the trustees and one of the beneficiaries of a New Zealand trust.
C. Most of the funds settled on the trust originated from either her parents or from a trust constituted by her parents. Currently, the trust assets comprise a 50% share in a New Zealand rental property. During her time in England, the net rental from the rental property has remained in New Zealand and has been taxed as trustees’ income. No distributions have been made to her by the trustees.
D. Pursuant to the New Zealand/ UK double tax agreement, she has a permanent place of abode available in New Zealand , but, presumably, until she reaches the 5 year anniversary of her UK ancestry visa and obtains the right to remain permanently, she cannot be viewed as having a “permanent” place of abode in England.
E. Our client, as well as the trust of which she is the settlor, are also beneficiaries of another New Zealand trust that was constituted by her parents. From time to time, this trust has made settlements on the trust constituted by the daughter, including during the time that she has been living in England, and the parents have also made gifts directly to the daughter. All of these transactions were effected between New Zealand bank accounts.
My questions are as follows:
- Does the UK have a transitional residency type arrangement by which income and assets that remain outside of the UK during the transitional residency period are not subject to the UK tax system, whether those be held in a trust or personally?
- If there is no such transitional residency type arrangement, what type of additions to the trust fund would be deemed to be non-qualifying additions?
- Which circumstances would trigger the trust of which the daughter is a settlor to become a UK resident trust?
- If a distribution is made to the daughter to a bank account in England (by either the trustees of trust of which she is a settlor or the trust constituted by her parents), presumably this will trigger a registration obligation on the UK Trust Registry.
Any assistance would greatly appreciated! Thank you.
Lee Harris
Foley Hughes, Lawyers, New Zealand