HMRC

I was instructed by non-UK resident Bermudan trustees of a number of trusts established in the 1950s for the benefit of US resident beneficiaries. Over many ...

HMRC contended that the wording of Section 812 was sufficiently wide that, notwithstanding the fact that the UK resident family members had not received, and might never receive, any income from the trusts if they died before the US principal beneficiary, the trustees were liable to UK tax on the UK source income. I then argued that the UK resident family members had no right to the present income of the trusts as they were neither life tenants nor members of the immediate discretionary class. I asserted that they only have a potential right to income if they are alive on the death of the principal beneficiary, and so are “contingent” beneficiaries. Crucially, his UK resident family members would only be able to take an income from the trusts in the event of his death. In addition, I was asked to consider whether a tax credit for tax paid in the US by the principal beneficiary could offset the trustees’ liability. The references to income include a reference to any capital insofar as it represents accumulated income.