On 13 September 2017, HM Treasury and HMRC published draft legislation for Finance Bill 2018 containing further changes for offshore trusts.
The new rules will apply to payments made by, and benefits received from, offshore trusts from 6 April 2018.
These measures are intended to ensure that:
- Capital payments made to non-UK resident beneficiaries (other than close family members) will no longer be matched against the pool of realised trust gains and so will not deplete (‘wash out’) gains available to be matched against subsequent capital payments to UK resident beneficiaries.
- Capital payments and benefits provided to beneficiaries who are close family members of a UK resident settlor (including a spouse, civil partner, cohabiting partner or minor child) will be taxable on the settlor to the extent that they are not taxed on the receiving close family member (for example, because that family member is either non-UK resident or a remittance basis user who does not remit the payment).
- Capital payments and benefits provided (either before or after 6 April 2018) to beneficiaries who are either non-UK resident or remittance basis users, with the intention of making an onward gift after 5 April 2018, directly or indirectly, to a UK resident beneficiary (which gift then takes place), will be taxed on the UK resident beneficiary.
These anti-avoidance measures were originally announced in December 2016. However, in March 2017, the government announced that the measures would be deferred. The measures that are now proposed complement the changes to the taxation of offshore trusts already contained in Finance (No. 2) Bill 2017.