When are overseas trust companies UK resident?

On 27 January 2009 HM Revenue & Customs (HMRC) published draft guidance on the application of the residence tests to overseas trust companies.

This guidance is important and relevant to all investors holding an interest (or units) in an offshore trust (or unit trust) that has "professional" corporate trustees or overseas corporate trustees that are owned by, or connected with, a UK-based group.

In particular, this guidance is relevant to trusts that have been set up, or are to be set up, with overseas corporate trustees with the intention of keeping any capital growth/gains outside the scope of tax in the United Kingdom. A failure to adequately maintain the trustees' and the trust's non-resident UK tax status may result in a UK capital gains tax liability crystallising on a disposal of an asset or even a deemed "exit" charge arising without an actual disposal of the asset.

Read Wragge & Co's analysis for more background on this issue.