Non-dom changes could lead to more Guernsey trust business

Offshore trust structures could become more valuable than ever when changes to the taxation of non-UK domiciled individuals are introduced next year.

That was the message from Saffery Champness specialist tax partners Clare Cromwell and Robert Langston who gave local fiduciaries an update on 12 October on the information recently released by the UK Treasury.

In proposals currently under consultation, from April 2017 long term UK resident but not domiciled individuals (“res non-doms”) will be taxed on their worldwide income and gains, rather than being able to claim remittance – being taxed just on UK income and gains and any income and gains they bring into the UK.

“If Guernsey trustees have got UK res non dom beneficiaries they will need to review the position for all of their offshore trust structures and there will also be people considering an overseas trust structure for the first time,” Ms Cromwell said.

“There are two reasons why more than ever settlors should be considering overseas trusts – firstly, to protect against UK inheritance tax; secondly, income and gains can be rolled up in the trust until the settlor benefits from it.

“Despite the changes, the offshore trust is still a valuable structure and there are lots of non-tax reasons why trusts are created, such as asset protection and succession planning. They are not just used for tax planning,” she said.

There would be considerable work to do in relatively little time, reviewing all existing trust structures and liaising with clients and advisers to identify whether any action would be needed pre or post April 2017. Fiduciaries generally don’t provide tax advice and they will need to ensure that their clients have taken appropriate advice.

It was stressed that the draft legislation might still be subject to change.

The proposed changes were first announced in July 2015 and the UK Treasury updated the proposals following a period of consultation in August this year. Further information may be issued during Chancellor Philip Hammond’s autumn statement on 23 November and in the Finance Bill 2017 on 5 December. The current consultation period will close on 30 January 2017.

Mr Langston covered other technical areas arising from the proposed changes before an audience of fiduciary professionals at the breakfast seminar hosted by the Guernsey office of Saffery Champness.