May 2020

Offshore structuring

by Anton Lane

There are many anti-avoidance provisions that could apply depending on what a settlement or person is doing. There are considerable provisions relating to the ownership of UK sited land and property. This Digest does not consider all potential anti-avoidance legislation that may apply to offshore settlements and concentrates on those affected by the trust protections.

Historically offshore trusts provided both non-UK domiciled and UK domiciled persons with tax advantages. Generally, where there was a change in legislation, a trust that existed at the time of the change was 'grandfathered' ie protected status. It is possible proof of age to be able to recall the pre-62, pre-65, pre-82 and pre-92 trusts although maybe not recalling the exact detail may be a better proof of age. I recall that the UK domiciled persons establishing offshore trusts before 1992 could subsequently make gains outside the scope of capital gains tax, although only through reading about as opposed to being in practice, which wasn't until several years later.

Over the past two decades, there has been an ever-changing approach to offshore trusts, their settlors and beneficiaries. One would hope the person responsible for writing legislation might be clear in what they want to achieve rather than revisit the legislation within a short period. A more thoughtful approach might alleviate the expense of policing by the Revenue. It might also lessen the professional fees although that is a large part of our economy.

The most recent changes were in 2008 and 2017. Nine years apart. It barely feels nine years since the introduction of the remittance basis charge, although during that period the Treasury kept the profession busy with disguised remuneration, managed service companies, disclosure of tax avoidance schemes and numerous settlement opportunities. However, the trust protections introduced from 6 April 2017 indicate that offshore settlements for non-UK domiciled persons are here to stay. The rules may be more confining, even complicated, although at the same time they also add clarity over the tax treatment that may arguably not have been present before. This clarity must be welcome following Finance Act 2016, which introduced (ss 162–166).

About the author

Anton Lane is a chartered tax adviser with over two decades handling contentious tax disclosure and cases of suspected serious fraud. Anton's career began at Ernst and Young where he qualified and specialised in defending clients under tax investigation. He has held senior positions with offshore fiduciary service providers and has built up considerable expertise on offshore structures, non-domiciles and international taxes.

Anton regularly contributes to Taxation, Tax Journal, the annotated finance act and is the author of four previous Tax Digests

Anton heads up his own practice of specialist advisers helping practitioners with tax consultancy and investigations.