Share this content

Offshore Trust and UK IHT exposure

I want to know if an Offshore Trust will be subject to any UK IHT implications

Didn't find your answer?

I have been asked whether an Offshore trust will have any UK IHT issues and have been completely stumped by the question.

The Trust has been set up in the BVI by a Non-Domiciled, Non-Resident individual.

It is managed by a Trust company resident in BVI.

The Trust's only asset is 100% of the share capital of a BVI company (company A).

That BVI company owns 100% of the share capital of a further BVI company (company B).

Company B owns residential properties in the UK which it rents out on normal commercial tenancies (not to anyone connected with any of the companies or the trust).

The Trust will not receive any rental income, it will receive dividends from Company A which in turn will receive dividends from Company B.

My concerns are whether the Trust Will be subject to Periodic and Exit charges and whether there are any other IHT implications I am missing.

Any help would be greatly appreciated, even if it is just pointing in the right direction of where to find the answer.

Replies (8)

Please login or register to join the discussion.

avatar
By Tax Dragon
14th Sep 2021 11:19

Further reading may be needed, but why isn't your starting point s6, s48 (and Pt3 generally) and Sch A1 IHTA 1984? Make sure you read up-to-date versions - these provisions have been heavily tinkered with.

Thanks (1)
Replying to Tax Dragon:
avatar
By DTB76
14th Sep 2021 12:21

Tax Dragon, thanks for the pointers I am working my way through the various sections. If I am completely honest, I think I am going to have to pass this question over to a specialist as advised by Red Leader. Reading the Act is possibly muddying the water more than clearing it for me, but I am genuinely grateful for the assist, very much appreciated.

Thanks (0)
Red Leader
By Red Leader
14th Sep 2021 11:41

OP: I don't know what your practice background is, but most general practitioners would pass this on to a specialist.

Thanks (1)
Replying to Red Leader:
avatar
By DTB76
14th Sep 2021 12:18

Red Leader, I have dealt with Trusts and Offshore Trust on a fairly regular basis, just never anything with a structure like this hence being stumped by this particular question.

Thanks (0)
avatar
By Justin Bryant
14th Sep 2021 12:49

As it owns (directly or indirectly) UK residential property it will be within the UK IHT net (since April 2017 re indirectly in a company). See:
https://www.gov.uk/hmrc-internal-manuals/inheritance-tax-manual/ihtm04311

Thanks (2)
Replying to Justin Bryant:
avatar
By Tax Dragon
14th Sep 2021 12:57

Agreed. And HMRC's commentary* on Sch A1 is also mandatory reading.

If you're used to dealing with trusts and IHT, these changes are probably within range. If not, pass it on, defo.

*https://www.gov.uk/guidance/enveloped-uk-dwellings-and-related-finance which I think is simply consolidated into/replicated in the IHTM at the link you provide (and subsequent pages).

Thanks (1)
Replying to Tax Dragon:
avatar
By DTB76
14th Sep 2021 14:16

TD, thank you that link was really helpful and explained things much clearer.

Thanks (0)
Replying to Justin Bryant:
avatar
By DTB76
14th Sep 2021 14:15

Thank you so much, that really clarified things for me.

Thanks (0)
Share this content