Non-resident Life Interest Trust

Dear Forum Members

I have not been engaged to advise on the tax position in relation to the following but I am interested to know the answer:

Dad dies resident in UK and domiciled in E&W. Will leaves marital home in England on a life interest for Mum with remainder to children. Executors and trustees of Will are daughter A and her husband B. At time of death and ever since, both A and B are resident in Jersey. Move forward 10 years, A and B are divorcing and B no longer wishes to be a trustee. The agreed replacement is UK resident.

Mum continues to occupy the property and there is no income.

I think the trust has been non-resident and will now become UK resident for tax purposes. Are there any issues the trustees should be aware of?

Lorna Sansom
Blandy & Blandy LLP

The main issue would be simply taking care that the trust is not accidentally exported again (e.g. if the UK resident trustee resigned or died in service).

Andrew Goodman
Osborne Clarke LLP

The deceased was both UK resident and UK domiciled at the time of death. Both trustees were non-UK resident. The trust was therefore initially non-UK resident.

If A remains non-UK resident and the replacement for B is UK resident then the trust becomes UK resident (as the settlor, the deceased, was both UK resident and domiciled at the time the settlement was created ie on death).

Some general comments:

  1. There will be no rebasing of the trust assets on importation to the UK.
  2. Split year treatment is inapplicable to trustee residence.
  3. As non-UK resident any trust capital gains on UK situs assets are subject to the non-resident CGT charge (and April 2015 rebasing) whereas as a UK resident trust any capital gains are subject to normal CGT rules no 2015 rebasing (subject to, for example, principle private residence relief).
  4. Presumably trust governed by English law, not Jersey law.

Malcolm Finney