Tax
Deadline on offshore assets fast approaching |
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| Tax | |
| Written by Paul Williams | |
| Wednesday, 27 January 2010 | |
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Trustees of offshore trusts need to take action now.
The end of January is a key deadline for trustees of offshore trusts, who need to be considering whether they should make a crucial 'rebasing' election by 31 January 2010 in respect of non UK trusts, says leading business and financial advisor, Grant Thornton. This all stems from the major changes to the UK residency rules that came into effect from 6 April 2008 but which are only just beginning to bite as relevant tax returns now have to be filed. The election was introduced to help the transition from the old residency rules to the new ones. If an individual had a trust set up before 6 April 2008 then, when that trust eventually disposes of assets, there may be gains that relate to those pre-6 April 2008 assets. These can benefit from the so-called 'rebasing' election which allows a revaluation as at that date which in many cases will lead to a saving of capital gains tax. If the trustees wish to make the election they need to complete a form (called the RBE1 which can be found on the HMRC website) and it must be submitted to HMRC on or before the 31 January following the end of the first tax year (beginning with 2008/09) in which one of the following occurs: a capital payment is made to a UK resident beneficiary or the trustees transfer all or part of the settled property to another trust. This means 31 January 2010 is an important deadline for many trustees as, if they miss this date, the opportunity to make an advantageous election will be missed. However, not everyone will need to make an election at this time. For example neither of the conditions mentioned above may have arisen in 2008/09. Others may opt to give up the chance of an election to keep their offshore tax affairs private from the eyes of HMRC. Chris Mills, Director in the Private Client team at Grant Thornton, comments, "High net worth non doms will want to consider carefully the pros and cons of making an election. Once made, it is irrevocable and applies to all assets in the trust, most assets in its underlying companies and those subject to the offshore income gain regime, regardless of the assets standing at a gain or loss. If there is an element of doubt as to whether a capital payment has been made then the trustees should consider whether to make the election to cover off the risk that the deadline for the election is missed. "All non-resident settlements with one or more current or potential non-UK domiciled beneficiaries should seek advice on the availability of the election and the consequences of making an election. Trustees should also be made aware of the relevant time limits for making the election," Mills concludes.
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