TSEM10025 - Non-resident trusts: residence rules: trust residence for Income Tax and Capital Gains Tax purposes - periods from 6 April 2007 - changes during the tax year

Changes in residence status - Income Tax

For Income Tax purposes, for the period from 6 April 2007 to 5 April 2013, where the residence status of the trust changes during a tax year, the year is split, so that a trust could be resident for part of the year and non-resident for the other part.

With the introduction of the Statutory Residence Test from 6 April 2013 there is no longer a ‘split year’ treatment where the trustees are individuals and the residence status of the trust changes. In such circumstances, if a trust is resident for part of the tax year, it is treated as resident for all of the tax year.

However,

-if an individual becomes or ceases to be a trustee of a settlement during a tax year,

-and if that tax year is a split year in respect of the individual,

-and if that individual was acting as a trustee only in the period when they were not resident in the UK,

then for the purposes of determining the trust residence they will be treated as if they were non-resident for the year. This exception is overridden if the trustee is acting as such in the course of a UK business (see TSEM10020 final paragraph).

The residence position of a corporate trustee follows the general rules for company residence when determining their residence for the purpose of determining the residence of the trust.

Changes in residence status - Capital Gains Tax

For Capital Gains Tax purposes, if the trustees are resident for any part of a tax year, gains arising at any time in the tax year are chargeable to Capital Gains Tax. However, under the Statutory Residence Test introduced with effect from 6 April 2013 an individual trustee who is resident in the UK for a tax year is resident for every day in that tax year, including those days that fall within the overseas part of a split year for that individual. If the individual was acting as a trustee only in the period when they were not resident in the UK, for the purposes of determining the residence of the trust they will be treated as if they were non-resident for the year. This exception is overridden if the trustee is acting as such in the course of a UK business (see TSEM10020 final paragraph).

The residence position of a corporate trustee follows the general rules for company residence when determining their residence for the purpose of determining the residence of the trust.

Where the trustees become non-resident during the year there may be an exit charge - see TSEM10270 and CG38200.