Where a discretionary trust owns residential property and the deed for the discretionary trust does not specifically exclude foreign beneficiaries, the trust will automatically be classed as a foreign trust.

If the deed for the discretionary trust that owns residential land is not amended to irrevocably exclude foreign beneficiaries before midnight on 31 December 2020, the trustee of the discretionary trust will be liable for:

  • 8% surcharge duty on the acquisition of residential property; and
  • 2% surcharge land tax in respect of any residential property held by the trust from and including the year of 2017.

To avoid being a foreign trust, the discretionary trust must meet both of the following requirements:

  1. no potential beneficiary of the trust is a foreign person (the “no foreign beneficiary requirement”); and
  2. the terms of the trust must not be capable of amendment in a manner that would result in a foreign person being a potential beneficiary (the “no amendment requirement”).

All discretionary trusts deeds are different therefore it is vital that your trust deed and circumstances are reviewed by a lawyer experienced in this area before any changes are made.

If you do need further assistance with this issue please contact us as our experienced team are here and ready to help.