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Welcome relief has been announced for trustees who move to the UK and (often accidentally) cause a trust to become UK resident.
Trust residence
The residence of a trust (for UK income tax and CGT purposes) is determined primarily by the residence of its trustees. If all the trustees are UK resident, the trust is UK resident. If all the trustees are non-UK resident, the trust is non-UK resident. Where there is a mix of UK and non-UK resident trustees, additional rules apply which can also take account of the settlor’s circumstances.
This can be a trap if, for example, a sole trustee unexpectedly becomes UK resident under the UK’s Statutory Resident Test, bringing the trust into UK residence with them.
The new relief for temporarily migrated trusts
Without the relief, if a trust becomes UK resident even for a short time, a CGT exit charge can arise when it ceases to be UK resident, even if the trust’s connection with the UK was only temporary. A trust that ceases to be UK resident is generally treated as disposing of and immediately reacquiring certain trust assets at market value, potentially creating a CGT liability on unrealised gains.
The Finance Bill 2026-27 introduces a new relief where a trust becomes UK resident as a result of one or more of its individual trustees moving to the UK, and the trust ceases to be UK resident later in the same tax year or during the following tax year. The new rules will therefore allow a trust to become UK resident temporarily without triggering the CGT exit charge when it subsequently ceases to be UK resident.
The measure will have effect for exit charges arising on or after 28 October 2026.
The announcement addresses the CGT exit charge only and does not remove the need to consider the trust’s wider tax and reporting position. Trustees who are planning a move to the UK, or simply spending extended periods of time in the UK, should take advice before doing so.