We are trustees of an offshore trust which holds UK real estate through an underlying wholly owned non-UK resident company. We need to make distributions to beneficiaries some of whom are UK resident. We are not holding sufficient cash reserves in the trust and we wondered if instead of receiving a dividend from the company it would be better to borrow funds from the company in order to fund these distributions.
It is generally not recommended for trustees of offshore trusts to borrow at the trust level particularly where there are UK resident beneficiaries. This is because of complex ‘trustee borrowing’ rules in TCGA 1992 Schs 4B and 4C. (All statutory references below are to TCGA 1992.)
Where a trust makes a ‘transfer of value’ that is ‘linked with outstanding trustee borrowing’ the trustees are treated as making a deemed disposal of all or...
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