This clause ensures that special rules treating
UK persons as receiving payments made by offshore trustees to
offshore companies which they control cannot be circumvented by
including non-resident persons within the group of people who
control the company. The measure, which takes effect by amending
the existing rules, applies for payments received on or after
21 March 2000.
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DETAILS OF THE CLAUSE
The clause provides for the deletion of the condition
that each of two or more persons who control an offshore company
which receives a capital payment from offshore trustees must be
resident or ordinarily resident in the UK before the payment can
be attributed to them under special rules.
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BACKGROUND
Under special rules contained in section 87-98,
TCGA, a charge may be made on beneficiaries in respect of gains
realised by offshore trustees. Amounts in respect of such gains
are attributed to beneficiaries when and to the extent that they
receive "capital payments" from the trustees.
Special rules ensure that "capital payments"
made to offshore companies controlled by beneficiaries, rather
than direct to the beneficiaries themselves, are treated as made
to the beneficiaries. Where the offshore company is controlled
by two or more persons, existing rules require that each of those
persons is resident or ordinarily resident in the UK before the
capital payments can be treated as made to them.
This condition is capable of being exploited by
the interposition of non-resident persons in the control of the
offshore company. This clause removes the condition and ends the
potential for abuse. However, existing rules will continue to
apply to ensure that only a part of the capital payment, broadly
in proportion to the controlling interest the UK person has in
the offshore company, can be treated as being made to him.
