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TonyTax
TonyTax, Tax Consultant
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Experience:  Inc Tax, CGT, Corp Tax, IHT, VAT.
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If I am a foreign national, resident outside the UK, and own

Customer Question

If I am a foreign national, resident outside the UK, and own UK property in a foreign trust, how do I calculate exit charges or other HMRC taxes if I sell the property before the 10 year anniversary of the trust ?
Submitted: 8 months ago.
Category: Tax
Customer: replied 8 months ago.
Hi - any idea of response time ?
Expert:  TonyTax replied 8 months ago.
Hi. Can you tell me if the settlor of the trust set up any other trusts on the same day and/or made other gifts or transfers in the seven years before the trust you are referring to was set up please.
Customer: replied 8 months ago.
No
Expert:  TonyTax replied 8 months ago.
Thanks. Can you let me have the following information please: 1 The initial amount put into the trust. Was any IHT paid by the trustees or the settlor at the outset? If it was paid by the trustees, how much was the IHT liability? 2 What date was the trust set up? What type of trust is it? Are the settlor and the beneficiary the same person? 3 Have there been any previous exit charges? 4 Confirmation that the property was not used in a business owned by the settlor.
Customer: replied 8 months ago.
Tony,1. Do you mean total debt, shareholder loan, shareholder equity, plus bank debt etc or just one component ? No IHT paid.2. Set up H2 2006. Discretionary Trust. No.3. No.4. Yes.Regards,
Expert:  TonyTax replied 8 months ago.
I don't normally read about trusts in the same sentence as shareholder equity, debt and bank debt in the same sentence. I just need to know how much cash or value in terms of a property was settled in the new trust.
Customer: replied 8 months ago.
Approx STG 1.5 m
Expert:  TonyTax replied 8 months ago.
Thanks. If you don't mind I will post my answer in the morning. I'ts just after 1am in the UK.
Customer: replied 8 months ago.
Tony - yes of course , I had no idea what time zone you were in ! Apologies for keeping you up .
Rgds
Expert:  TonyTax replied 8 months ago.
You should refer to the notes on pages 57 to 61 here, in particular the formula on page 58 and Illustration 1 on page 59 to see how I arrive at my figures. There is no second trust "B". A is £1,500,000, B is £0. C is £1,500,000. D is £325,000. E is £0. F is 325,000. G is £1,175,000. NT is £235,000. ER is 16.67%. AR is 4.466%. Exit Charge is £1,500,000 x 4.466% = £66,990. That's assuming you pay the exit charge. If the trustees pay it, the AR would be 4.674% and the exit charge would be £70,110. See Illustration 2 on page 61. My figures assume that the exit of the property from the trust occurs in quarter 39 of 40. At the end of quarter 40, the 10 year charge would be due. See the notes under "CGT " on page 24 for the Capital Gains Tax position on the distribution of a property from an offshore trust. CGT is paid by individuals at 18% or 28% or a combination of the two rates depending on the level of their income in the tax year of disposal. The first £11,00 of gains made in a tax year are tax free. Refer to the notes here and here. If the property is sold by the trust, it will pay CGT at 28% on the gain after the deduction of the expenses of sale and the annual CGT exemption for trusts of £5,550. Any gains not distributed to the beneficiary within a certain time may the CGT charge enhanced. See HS301. I hope this helps but let me know if you have any further questions.
Expert:  TonyTax replied 8 months ago.
HS301 is here.
Expert:  TonyTax replied 8 months ago.
Hi.I'm just following up to find out if my answer helped or if you have any further questions.

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