Foreign domiciliaries living in the UK have an array of issues to deal with, including the management of their assets (which are often dispersed worldwide), the interaction of multiple fiscal and legal systems and changes in their residency and fiscal status. Dominion can assist in careful and considered planning using trusts to alleviate or extinguish these issues, as well as providing considerable taxation benefits.

Key Features

Discretionary trusts provide a highly flexible approach to estate and wealth planning, with the main advantages being:

• consolidation of the individual’s estate under one umbrella
• avoidance of probate on death
• provision of an alternative to multiple wills in different jurisdictions
• enablement of a flexible approach to accommodate changing circumstances with little effort
• some freedom from various UK taxes
• potential protection against future changes in law
• asset protection for internationally mobile workers by taking these assets out of the legal ownership of the individual, thereby removing them from the taxation net in various countries
• free movement of assets without exchange control restrictions and
• protection of minor/vulnerable beneficiaries.

Many individuals who have established discretionary trusts find the consolidation of their worldwide wealth to be invaluable.

In terms of UK tax benefits for foreign domiciliaries, there are two strands.

First, provided that the income and capital gains are not remitted to the UK, there is no income tax or capital gains tax payable in the UK on the income and capital gains in the trust. However, since 6 April 2008 there has been a flat-rate annual charge of £30,000 for foreign domiciliaries who have resided in the UK for seven out of the previous nine years and who wish their foreign income and gains to be taxed on the remittance basis. Those not wishing to be taxed on the remittance basis will instead be taxed on worldwide income and gains (even if they are not remitted), just as a UK domiciliary is taxed. It is therefore in a non-UK domiciliary’s best interest, if he or she has resided in the UK for seven years and has sufficient non-UK income and/or gains, to elect for the remittance basis and pay the additional tax of £30,000. Alternatively, it may be a good idea to consider putting the assets into a discretionary trust before the individual has resided in the UK for seven years.

Secondly once the assets are put in the trust they are no longer in the individual’s estate for inheritance tax purposes and therefore if they remain in the UK for seventeen years or more then although they become deemed UK-domiciled for inheritance tax the assets have already been removed from their estate.

If you would like to discuss Personal Discretionary Trust please speak to Andrew, Ben or Stacy on our Wealth Management Team.