Non-UK domiciled beneficiaries may want to ‘raid’ their offshore trusts after 5 April 2025

The issue

The temporary repatriation facility (TRF) which was announced on 30 October 2024 was a rare piece of welcome news for non-UK domiciled but resident individuals. Anybody who had been subject to the remittance basis in any tax year up to and including 2024/2025 has the opportunity to remit pre-6 April 2025 foreign income and gains at a flat rate of 12% for 2025/2026 and 2026/2027 and at flat rate of 15% for 2027/2028. Typically, this will involve the individuals remitting gains and/or income that has previously not been subject to UK tax because of the remittance basis. In order to use the TRF, individuals need to designate amounts or assets and pay the relevant TRF charge.

TRF and trusts

Beneficiaries of certain offshore trusts (typically those settled by a non-resident or non-domiciled individual) are often taxed by having any benefits matched to income and gains that have built up in the structure. Any such unremitted benefits can form part of this regime. However, perhaps surprisingly, in certain circumstances, benefits received after 5 April 2025 can also qualify.

Example

A Jersey trust was set up by a non-domiciled dead settlor and Jack is a UK resident yet non-domiciled beneficiary (who has previously claimed the remittance basis). The trust has built up £500,000 of offshore ‘relevant income’ as at 6 April 2025. Before 6 April 2025 Jack would have been subject to tax at 45% on any benefits that he received from the Trust and remitted to the UK (to the extent that it could be matched to the ‘relevant income’). If the Trust pays Jack £500,000 in 2025/2026, then under the TRF regime he would only have to pay £60,000 of tax rather than £225,000, which would have been payable previously.

WSM’s view

For certain individuals, this will be a great opportunity, but it is important that they have claimed the remittance basis before 6 April 2025. There may still be time for certain non-domiciled beneficiaries to receive benefits from a trust offshore in 2024/2025 (i.e. before 6 April 2025) and then claim the remittance basis for that year. Afterwards, they would be able to extract relevant income in line with the example above. All historical remittance basis taxpayers should be reviewing planning opportunities in relation to any offshore trusts that they can benefit from. The rewards could be significant.