Guernsey: It’s A Trust Jim But Not As We Know It

Last Updated: 31 December 2012
Article by Ben Tustin

Most Read Contributor in Guernsey, November 2017

Ben Tustin, Manager Founding Director of Marlborough Trust in Guernsey, considers some examples of how the innovative Risk Purpose Trust (RPT) could be utilised.

With constant changes to non-UK domicile rules, and regular attacks from HMRC, you would be forgiven for thinking that the use of trusts for tax and commercial planning is now somewhat limited. However, this would be forgetting the very nature of the trust itself - to provide benefits in a highly flexible and adaptable manner.

It is this flexibility that led to the creation of the Risk Purpose Trust ("RPT"). The RPT was conceived, developed and implemented by Princeps Limited; a joint venture between Guernsey trust company Marlborough Trust, Robus Group, the Guernsey and Gibraltar based insurance managers and Richard Gale, insurance sector consultant.

The original idea was borne out of the use of healthcare trusts. We felt that the RPT could be used as either an alternative to captive insurance, or could sit alongside an existing captive in order to provide the parent company with more options, particularly when it comes to retaining profits and subsequently distributing capital and profit.

As part of the 2 year research and development process it became clear that the uses of a RPT were much wider than those originally envisaged. The potential applications extended to cover such things as:

1) Support and provision for the unforeseen expenses of a corporation generally

2) Potential legal expenses or court awarded costs arising out of litigation

3) Environmental liabilities

4) Gratuity payments, incentive payments or sports bonuses

5) Future repair costs or replacement costs (ie foreseen expenses)

6) Rent guarantees for landlords of large property portfolios

7) Potential pension shortfalls

8) De-commissioning Costs

9) Dilapidations Planning

10) Research and Development Costs

11) Anything else you can think of!

How does it work?

An RPT acts as a repository for funds from any corporation or corporate group which can then be used by the Trustees to fund expenses of the corporate as set out in the Trust Deed. The RPT receives contributions from the Company and those contributions are then used to support the Company.

An RPT is a Trust, with an independent Trustee (Marlborough), a Settlor (the Corporation) and Beneficiaries (the Corporation and its group companies). The Trust receives contributions from the Corporation in relation to risks or expenses for which it wishes to provide. The Trust holds these funds until they are required and then distributes them to the appropriate beneficiary.

So, that's the basic principle, but let's looks in detail at some live examples:-

1. A major UK brewery both produces beer and owns upwards of 2,000 pubs. They currently have a captive insurance company in Guernsey that covers the first £250k of losses per claim. Their current captive has the following disadvantages that would not be experienced by an RPT:

  • They must provide sufficient capital to fund the captive's solvency requirement and suffer the net cost of providing that capital.
  • They pay Insurance Premium Tax, charged on premiums remitted to the Captive.
  • Regulatory Fees and the costs of dealing with regulatory supervision are payable.
  • The investment restrictions on the assets in the captive are such that nothing more interesting than a bond fund can be held.
  • The profits of the captive must be distributed to the parent every 18 months.

The aim of the captive was to reduce the insurance costs of the brewer by managing their own risk in the first instance, however they now experience all of the disadvantages mentioned above. Were the captive to be replaced with an RPT then not only are the costs mitigated, but also it allows greater flexibility for the brewer with regard to whether or not the RPT's assets are consolidated into their balance sheet. They can also then choose to take funds back into the UK or maintain them within the RPT, potentially indefinitely.

2. A Premier League football club has its players license their image rights to the club and subsequently attempt to exploit those rights with global merchandising. The club might establish an RPT and make contributions to it in order to fund futures unforeseen expenses. The RPT could then establish a company in Guernsey that will subsequently own the licenses to the players' non-UK image rights. The image rights company would appoint the appropriate professionals to exploit those rights fully in other territories, and profits would flow into the RPT without being subject to UK tax unless funds are remitted back to the club.

An example of an unforeseen expense may be that a first team defender is sacked for bringing the club into disrepute (quite likely these days!), and a new defender is bought in for a substantial transfer fee that results in the club slipping into loss making territory for that financial year. The RPT can then distribute sufficient funds to the club to cover this loss (sourced from both contributions and gross profits from the image rights exploitation) which may be found to be helpful when the club publishes its financial statements - particularly once the UEFA financial fair play rules start biting from 2013 .

A private equity fund acquires a startup company which has developed a new technology enabling more crude oil to be obtained from existing North Sea oil rigs than current technology.

The company acquires a rig that has a remaining expected life span of 10 years before decommissioning, with the intention of drilling for approximately 5 years to make maximum use of the new technology.

The problem here is the decommissioning of the oil rig. The UK government is, rightly, concerned about the risk posed by oil drilling companies when the useful life of their rigs has come to an end. The concern is that the drilling company will have distributed all of their profits with no funds available for decommissioning - leaving the taxpayer to pick up the bill. The government can therefore impose what is known as a section 29 notice on the company, resulting in sufficient funds having to be lodged with a 'security trustee' to cover the future costs (you can see where I'm going here).

The issue for the private equity fund is that assets are tied up, even though they intend to sell the rig before decommissioning, but more critically those assets come off the balance sheet of the company without a corporation tax deduction. The company could establish an RPT, and fund it over a period of time in order to cover this future known cost. Once again, suitable investments can be made by the RPT however, crucially, the contributions can, with the correct implementation, obtain a corporation tax deduction. This leaves the overall cost of providing the security substantially reduced for the company and therefore increases the returns to the private equity fund.

As can be seen from these 3 radically different scenarios, the RPT is fulfilling its remit of being adaptable to the relevant circumstances of the establishing company.

Tax Treatment

As mentioned above, the RPT has been launched aiming primarily at the UK market, although research and development for other jurisdictions is under way. Thus, from a UK perspective the tax treatment can be broadly summarised as follows:-

  • No Insurance Premium Tax is payable on contributions to the RPT.
  • Under advice and careful implementation the company should obtain corporate tax deductions on contributions.
  • Distributions to the parent company are likely to be taxed, however this will depend upon the nature of the expense for which the RPT is providing funds.
  • If the parent company is a 'close' company for tax purposes (controlled by 5 or fewer shareholders), then 10 year inheritance tax and exit charges may apply. However, our professional advisers will provide specific advice in this regard on a case by case basis.
  • The Trustee will be non-UK resident for UK income tax and capital gains tax (CGT) purposes. Thus the funds will be outside the scope of UK income tax, unless UK source income is received from investments. The trust rate of taxation will apply to UK source investment income (50%) and dividends (42.5%).

So, the tried and tested trust concept is again morphed to provide what has turned out to be quite a broad ranging solution for corporates and risk funding generally. And after all, this is really nothing new, that's the essence of what makes a trust so unique. Adaptability, longevity and acceptability.

Originally published in Offshore Investment, November 2012

For more information about Guernsey's finance industry please visit

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
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 you may opt out by clicking here

    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.

    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.


    From time to time Mondaq may send you emails promoting Mondaq services including new services. You may opt out of receiving such emails by clicking below.

    *** If you do not wish to receive any future announcements of services offered by Mondaq you may opt out by clicking here .


    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.

    By clicking Register you state you have read and agree to our Terms and Conditions