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Warning for Offshore Trusts

A recent decision from the Special Commissioners has highlighted the fact that UK advisers should not take too much of a hands on approach with regard to offshore trusts. The particular case (Trustees of the Trevor Smallwood Trust and HMRC) involved a tax scheme to avoid UK capital gains tax.

Briefly the facts were:

  • A Jersey trust held shares that were pregnant with gain which would have been assessed on the UK resident settlor if they were realised. 
  • On the advice of UK tax advisers new trustees were appointed who were resident in Mauritius.
  • The plan was that the Mauritian trustees would sell the shares and subsequently, but in the same UK tax year, the Mauritian Trustees would resign in favour of UK trustees. 
  • Under the Double Tax Treaty with Mauritius the gains would have assessable in Mauritius (with no tax payable) and not in the UK.



Date: 4th March, 2008
Author: Liz Cuthbertson


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