Monday, May 10, 2010

Will you be able to trust previously non-dom MPs and Lords?

With all the fuss over non-dom peers, it's likely that only inheritance tax advisers have been thinking about excluded property trusts.

As Kevin Slevin explains in his recent article (Parliament: Are they 'Pulling the wool over our eyes' again?) these trusts are very valuable. They have also been a standard tool in the armoury of tax advisers to non-doms for many years. Simply stated, the non dom establishes a non-resident settlement (trust) before their domicile status changes. Typically this would be to limit the impact of the rule that treats a non-dom as domiciled here if they have been resident here for 17 out of the last 20 income tax years of assessment.

All of the offshore assets held in the offshore excluded property trust effectively escape the inheritance tax net. The relevant provisions are contained in s48 IHTA 1984 and were not amended as part of the FA 2008 changes to the tax treatment of non-doms.

There may be good practical reasons for allowing assets held by trusts created by a non-dom to be excluded from IHT. But, as Kevin points out, these provisions, as they stand, allow well-advised MPs and Lords to, effectively circumvent the IHT implications of any rule requiring them to be or to be treated as domiciled here. Can they be trusted not to make such arrangements immediately before choosing to stand for election or before taking their seat in the Lords?

What do you think?

1 comment:

  1. Paul & Uddin will be able to benefit from treaty protection in any event.