Isle of Man-Based Trusts Could Fall Foul Of New Pre-Owned Assets Tax Rules

by Jason Gorringe, Tax-News.com, London

07 February 2005

A leading tax expert has warned that many trusts domiciled in the Isle of Man could fall foul of new measures designed to tighten up the tax rules surrounding pre-owned assets for UK taxpayers.

According to the Daily Telegraph, Nick Williamson, managing director of fiduciary services company Walbrook Group, revealed that as many as one-fifth of trusts in the Isle of Man with UK beneficiaries could be affected by the new rules, which come into effect in April.

In effort to clamp down on tax planning schemes that seek to mitigate the effects of inheritance tax, the UK government is introducing a new system which will subject benefits enjoyed from previously-owned assets now held in trust to income tax.

The new rules will not only affect property but also investments and other assets.

Mr Williamson explained: "The change may well affect British expats if they are beneficiaries from trusts set up by UK taxpayers. The new rules apply to any assets transferred into trust since March 1986, which would affect a lot of trusts."

He warned that some trusts may need "drastic restructuring" before the introduction of the amended rules, to combat the effect of new taxation.

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