In the Draft legislation: Deemed Domicile – Income Tax, Capital Gains Tax and Inheritance Tax published 5^th December 2016 as updated by drafts including relating to the taxation of trusts on 26^th January 2017 headline details of the proposed taxation of trusts are as follows:-

If the trust and the settlor meet all the necessary pre-conditions and no income or property is added to the trust from the settlor or any other trust of which the settlor is a beneficiary, then;

• Income arising in a protected trust will be taxed not on the settlor on an arising basis but only when settlor or another beneficiary receives a benefit (whether the recipient is in the UK or not).

• In respect of UK resident non-domiciled persons, distributions can be sheltered if these are on the remittance basis and the monies are not remitted to the UK.

• The settlor will also be liable to income tax on benefits conferred on close family members unless the family member is taxed in the year in question.

• It will be important to ensure that the 3 year onward gift anti-avoidance provisions are not infringed.

• As regards Capital Gains Tax a UK resident settlor is protected in respect of gains made within the trust until such time as benefit is conferred on himself a close family member whether or not the family member is resident in the UK.

• A repayable on demand loan which was made directly or indirectly to a relevant trust prior to 6 April 2017 on non-commercial terms e.g. at a low or nil rate of interest and which remains outstanding on that date will generally be regarded as a provision of property for the purposes of the settlement. Consequently, where after 5 April 2017 a loan has not been repaid or adjusted to commercial terms, the condition at new sub paragraph 5A(1)(e) would be met. The provision at 5A(1)(e) will apply equally where the loan was initially for a fixed period but falls to be repaid after 6 April 2017 such that it becomes a repayable on demand loan. There will however be a transitional provision so that the condition is not regarded as met where, before 6 April 2018, the loan is either repaid in full together with any outstanding interest or made subject to fully commercial terms.