Surcharge Tax Hits Discretionary Trusts

The Office of State Revenue (OSR) has released a ruling on 22 December 2016 in relation to the definition a 'foreign person'. This is important if you hold an investment property in a discretionary trust.

The OSR ruling confirms that the trustee of a discretionary trust is deemed to be a 'foreign person' if the class of potential beneficiaries of the trust could include a foreign person, even if that person is not specifically named. For example, if the class of potential beneficiaries includes a cousin who was born and lives in London, the trust may be deemed to be a 'foreign person' even if your cousin has never received a benefit under the trust. It is enough that a foreign person could benefit under the trust.