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The Finance Bill contains provisions to counter a new version of an avoidance
scheme known as a 'flip flop'. The scheme seeks to enable payments made
by offshore trustees to UK beneficiaries to escape the appropriate charge
to capital gains tax. The Chief Secretary to the Treasury has tabled an
amendment to those provisions, that clarifies their commencement effects.
Details
- UK beneficiaries of offshore trusts are normally charged to tax by
reference to gains realised by the trustees if they receive capital
payments from the trustees.
- Legislation introduced in Finance Act 2000 (FA 2000) countered an
avoidance scheme commonly known as a flip flop. Clause 162 of, and Schedule
29 to, the current Finance Bill extend the FA 2000 legislation to counter
the new flip flop schemes.
- The amendment deals with a rule that requires payments from trustees
to beneficiaries who are not domiciled or not resident in the UK to
be ignored when computing the amounts that may be taxed on UK beneficiaries.
Beneficiaries who are not UK domiciled and resident are not chargeable
under the relevant provisions and payments to them may be used to avoid
the liability on UK beneficiaries.
- The amendment puts it beyond doubt that the rule applies to payments
made to non-chargeable beneficiaries on or after Budget Day, and that
the treatment of any such payments made before Budget Day remains unchanged.
Notes for Editors:
The changes introduced by Clause 162 and Schedule 29 apply only to payments
made on or after Budget Day. But there was some uncertainly about payments
to non-chargeable beneficiaries. The amendment makes the position clear.
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