Friday 6 March: Dawn Primarolo MP, Financial Secretary to the Treasury, in a reply to a Parliamentary Question, closed a scheme to avoid UK capital gains tax on the repatriation of capital into the UK from an offshore trust. The scheme although not without risk had been used to break existing offshore trusts in a tax efficient way by importing the residence of the trust into the UK, by changing the trustees and then relying on a statutory exemption to sell the interest in the trust to a third party.
The way in which this "loophole" has been blocked is interesting as clearly the Inland Revenue were concerned that the scheme would be effective and that it proposed a significant risk of financial loss if action was not taken before the budget on 17 March. Consequently Ms Primarolo stated that the change was to be effective from last Friday.
One glint of sunshine is that as remedial action was taken against this scheme in advance of the budget this may imply that the pre 1991 offshore trust status will continue after the budget. If the tax advantage for this type of trust was to be abolished completely in the budget why not make this effective from Friday as well?.
Clearly there is likely to be more on this subject in next week's budget and these pages will be kept updated.
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