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HMRC internal manual

Trusts, Settlements and Estates Manual

Non-resident trusts: residence rules: professional trustees not resident in the UK - introduction and background


The following guidance gives HMRC’s view on the application of the residence tests in section 69 (2D) Taxation of Chargeable Gains Act 1992 and section 475 (6) Income Tax Act 2007 in relation to overseas trust companies particularly those owned by UK-based groups.


There have been longstanding tests to determine the residence of trustees to establish whether the trust of which they are a trustee is subject to UK tax.

However, these rules were different for income tax and capital gains tax with the result that trustees could be UK-resident for income tax purposes but non-UK resident for capital gains tax, or vice versa.

Therefore in Finance Act 2006, as part of the Trust Modernisation programme, the Government made some changes to the trustee residence test and introduced a common test for both income tax and capital gains tax.

One of the objectives of the Trust Modernisation programme was to provide greater consistency of approach between income tax and capital gains tax in relation to the taxation of trusts so reducing the administrative burden especially on smaller trusts.

The new legislation, Section 69 Taxation of Chargeable Gains Act 1992 (and for income tax section 685E Income and Corporation Taxes Act 1988, now replaced by sections 475 and 476 Income Tax Act 2007) took effect from 6 April 2007.

The rules that came into force on 6 April 2007 treat the trustees of a settlement as a single person, as distinct from the persons who may be of trustees from time to time. The residence status of that single person (referred to below as the “body of trustees”) at any given time is determined in the first instance by the residence status of the persons who are trustees at that time:

  • If all the trustees are either resident in the UK or not resident in the UK, the residence status of the body of trustees follows that outcome.
  • If at any time at least one trustee is resident in the UK and at least one is not, the body of trustees is resident in the UK only if any settlor of the trust was resident, ordinarily resident or domiciled in the UK at any time when he or she introduced property into the trust.