Tax Treatment of Trusts

The tax treatment of trusts is a complicated area and can vary by country. However, in summary, and from a UK perspective:

• Trusts are not recognised as separate legal entities
• Where the majority of the trustees are not resident in the UK the trust will be a non-resident trust
• A non-resident trust is only assessable to UK tax in respect of its UK income
• Where a trust is a settlor-interested trust and the settlor is UK-resident there are complex assessment rules that may apply

In short, trusts are one situation in which professional advice with respect to tax is a necessity, rather than an option. If you have an existing UK trust and are being transferred overseas, or wish to establish a trust whilst resident overseas, tax advice should be sought prior to departure or the establishment of the trust, regardless of its location.