A new client (UK citizen,resident and ordinarily resident) is the beneficiary of a relative's trust written under US law. He wants to know what % tax (if any) will be deducted when the trust is folded following the demise of the settlor and main beneficiary. Anyone got a clue?
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Short question-answer potentially a book !
Presumably client is UK domiciled.
On that basis, the first vital question relates to income within the trust, Can client claim relief from income tax on undistributed income within the trust under ss736 to742A ITA ? Otherwise any funds paid to client wiil be matched first with undistributed trust income under s731. The trust may have been a 'Grantor '[settlor interested] Trust in the US, in which case for US tax purposes the income will have ben treated as that of the settlor.
Assuming the settlor was not UK domiciled, prima facie once the income tax question has been reolved, any gains made within the trust after 5th April 1997 will be atrtributed to a UK beneficiary who receives a capital payment from the trust[See TCGA s87] with a surcharge under TCGA s.,91.
A further complikcation can arise if the trust was invested in mutual funds, profits on which can be subject to UK income tax if they are 'offshore funds'.
To turn to the question you have posed, much will turn on whether this has been a grantor tust, and whether you client is the reversionary beneficiary follwing the death of a life tenant[if that is what the main beneficiary was]
As you will gather this is a specialist area, and I would strongly recommend that you point your client to a specialist in the field. Not an area for dilettantes