Isle of Man: Trust Taxation

Last Updated: 28 September 2009
Article by John Rimmer and Annemarie Hughes


Manx tax legislation does not specifically refer to Trusts and instead taxes according to a mixture of both residence and source basing factors in each case.

For Manx income tax purposes a Manx trust is one where either:

  1. At least one trustee is resident in the Isle of Man; or
  2. The trust administration is conducted in the Isle of Man.

The trustees of a Manx trust are not liable to pay tax on the capital gains arising. The taxation of income depends upon the type of Trust and whether or not income is distributed as follows (see also Treasury Practice Note 141/07):


In such trusts an individual has an immediate entitlement to the income of that trust as and when it arises.

In these circumstances it is the beneficiary who is taxed upon that income as if that income had accrued directly to him. The trustees are not liable to pay tax.


(a) Income Is Distributed

The beneficiaries receiving income are taxed according to the tax laws of their place of residence.

(b) Income Is Not Distributed

In this case the trustees will be taxed on undistributed income:

  1. If all of the beneficiaries are non-Isle of Man resident the trust will be taxed as if its income had been received by a non-resident individual. If all income (except approved bank interest) arises or accrues from sources outside the Isle of Man and there are no Isle of Man beneficiaries then there will be no Manx income tax to pay.
  2. If there are any Isle of Man resident beneficiaries there will be a charge to Manx income tax.

Note also that there is no Manx tax to pay on either capital gains or dividends received by a non-Isle of Man resident beneficiary from an Isle of Man resident company but that beneficiary may be taxed in the place of their residence.


  • Reporting Requirements

    UK legislation provides that any person who in the course of their trade or profession is concerned in the making of a settlement (otherwise than by Will) by a UK domiciled Settlor having non-UK resident trustees must make a return to HMRC within three months of that trust's creation. Confirmation should be obtained that this has been done where applicable.
  • Manx Trust Deed Drafting

    Any instrument relating to real or personal estate must not be drafted by an person not qualified as an Advocate.
  • Financial Supervision Commission

    Depending on the circumstances the trustee of a Manx trust may require to be licensed.


The residence of a trust is decided by HMRC using the following test:

  1. If all of the trustees are UK resident the trust is UK resident.

    If all the trustees are not UK resident then the trust is non-UK resident for UK tax purposes.
  2. Mixed Residence

    If there are both UK and non-UK resident trustees then the trust will be deemed a UK trust if any Settlor of funds to that trust was resident, ordinarily resident or domiciled in the UK at any time that property was introduced to that trust.

    Further, anti avoidance legislation in the UK treats trustees as UK resident if they act as a trustee in the course of a business which is carried on through a branch, agency or permanent establishment in the UK.


There are certain anti-avoidance provisions in UK tax legislation whereby a UK resident Settlor or beneficiary may become liable to UK income tax, capital gains tax or inheritance tax.

  • Income Tax

    UK resident beneficiaries receiving benefits out of a Manx trust will be liable to income tax on those funds at their own marginal rate. HMRC notionally accumulates income within a Manx trust and attributes that income to any UK resident beneficiary receiving benefits from the trust.
  • Capital Gains Tax

    As noted above that there is no capital gains tax payable by the trustees of Manx trust however:
    1. If a UK resident and domiciled Settlor or their spouse/civil partner retain an interest in a Manx trust themselves or through their children or grandchildren HMRC automatically attribute capital gains to that Settlor even if those monies are not paid out by the trustees.
    2. The Beneficiary Charge.

      Any UK resident beneficiary receiving a capital payment out of a Manx trust will have any prior capital gains attributed to them and will therefore be liable to pay capital gains tax at 18% on those monies.

      There is a further 10% interest charge payable for each year (up to a maximum 6 years) during which any capital gains are held within a Manx trust but have not been received by the UK resident beneficiary. UK resident beneficiaries are therefore potentially liable to 28.8% UK tax on gains received from a Manx trust.

      The Finance Act 2008 in the UK extended the beneficiary charge so that non-UK domiciled persons utilising the remittance basis of taxation may also be liable to capital gains tax if they remit trust monies to the UK.
  • Inheritance Tax

    An inheritance tax charge can arise upon the creation of a Manx trust by a UK individual and there may also be a 10 yearly anniversary charges and exit charges when monies leave that trust.

    It is possible to create an excluded property trust having no inheritance tax consequences if a trust was created by a non-UK domiciled Settlor and it holds no UK assets.

The exact circumstances of each case need to be analysed carefully and trustees should consider the tax implications of making distributions out of a Manx trust or otherwise exercising their powers in all cases but particularly with regard to UK resident beneficiaries.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

In association with
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.