The advantages for an individual who is to become UK Deemed-Domiciled for income tax or capital gains tax from 6th April 2017, in settling offshore assets into a Bourse Protected Trust are as follows¹ – it is worth also considering our Info Sheet, Executory v Settlement by transfer of assets which illustrates the advantages of establishing a Bourse Protected Trust over establishing a ‘normal’ trust and then settling assets in following establishment:

• Any assets settled in a Bourse Protected Trust on or before 5th April 2017 in accordance with the Protected Trust Application Form and settled on an executory basis, are protected from being subject to UK inheritance tax, UK income tax and UK capital gains tax if no additional property is added after that date.
• It opens a 24 month period to 5th April 2019 in which to separate clean capital from income and gains.
• Allows onward investment in other products.
• It allows assets to be settled into trust quickly, by equitable assignment with the legal title then transferred at a later date.
• A Bourse Protected Trust is flexible in that it is capable of holding any asset including:
  • Cash;
  • Offshore investment bonds; and
  • Private company shares.

Any gains or income realised in a Bourse Protected Trust will effectively be rolled up pending the payment of a capital or income distribution or the provision of any other benefit to any of the beneficiaries.

For an outline of the new taxation regime relating to offshore trusts, see here.

Notes:

1. The Protected Trust Application Form and the Bourse Model Trust Deed, subject to which each Bourse Protected Trust shall be administered, are available on request from Bourse.
2. Where the trustees invest in an Offshore Bond or Living Annuity, capital distributions should be available if funds originated from clean capital.
3. Where an investment is made by trustees after 6th April 2017 in an offshore bond with the individual as policyholder this will be treated as a distribution and whether there is a tax charge arising will depend on whether the original funds were clean capital or mixed funds.
4. The content of the ‘Bourse info sheet – Special Considerations for IHT Deemed-Doms’ should also be considered to ensure that there are no adverse consequences for the client of settling a Bourse Protected Trust.

¹ Subject to any changes in draft legislation and responses to consultation.