HMRC confirm ongoing planning opportunity for offshore trusts with UK beneficiaries
25 June 2010
As is now probably well known, the UK's Emergency Budget on 22 June announced a mid-year increase in the top rate of Capital Gains Tax (CGT) to 28%. As CGT rates have not changed mid-year before, transitional measures will be introduced for gains made before 23 June. These transitional measures potentially present an interesting opportunity for offshore trustees and their UK beneficiaries.
In correspondence with John Barnett (Burges Salmon partner and chair of the Chartered Institute of Taxation's CGT Committee), HMRC confirm that where gains are "matched" under s87, the key date will be the date of the capital payment, not the date the trustees realise a capital gain.
This gives the possibility that beneficiaries who have received excess - i.e. as yet unmatched - capital payments before 23 June may benefit from the transitional rules, even if the trustees' gain is realised at a later point in the 2010/11 tax year. This applies even if the capital payment was received before the current tax year. But it will cease to apply from 6 April 2011.
Trusts in this position may want to consider realising further capital gains in the current tax year to mop-up any excess capital payments.
Burges Salmon have significant experience of helping trustees understand the matching process, including the complex transitional rules introduced for non-domiciled beneficiaries in 2008 and would be delighted to help offshore trustees or their beneficiaries in reviewing cases where this planning opportunity may be relevant.