Trusts, family foundations and holding companies are good structures to manage property, investments and succession across several countries.
These arrangements may be fully legitimate and carefully planned; however, different countries can interpret the same structure in different ways. Questions may arise over residence, ownership, capital gains, inheritance tax or the treatment of payments made to individuals.
The UK government is now considering wider reporting rules for particularly valuable cases where the correct UK tax treatment is uncertain.
The proposals are not yet law, however, individuals with substantial UK assets or complex cross-border structures should understand the possible changes and review whether their tax position is clearly documented.
The UK’s Notification of Uncertain Tax Treatment regime was introduced in 2022.
At present, it mainly applies to very large companies and partnerships. A business may have to notify HM Revenue & Customs, or HMRC, when it adopts a tax treatment that differs from HMRC’s known position or records a provision for tax uncertainty in its accounts.
The current regime generally applies only where:
the business meets very high turnover or balance-sheet thresholds; and
the potential tax advantage from the uncertain treatment exceeds £5 million.
This means that most private investment companies and family-owned businesses are currently outside the regime.
The government consulted on a significant expansion of the rules during 2026.
The proposals include bringing individuals and trusts into the regime when an uncertain legal interpretation produces a potential UK tax advantage of more than £5 million.
Unlike companies, individuals and trusts would not need to meet a turnover or balance-sheet test. In principle, any individual or trust could be covered if the value of the uncertain tax position exceeded the threshold.
The government has also considered extending the regime to more taxes, including:
Capital Gains Tax;
Inheritance Tax;
Stamp Duty Land Tax;
National Insurance contributions; and
certain Construction Industry Scheme obligations.
A further proposed trigger could require reporting where HMRC has not published its position and more than one credible interpretation of the law exists.
This last point is important. A taxpayer might potentially have a reporting obligation even where the position is genuinely unclear and HMRC has not explained how it believes the law should apply.
The Institute of Chartered Accountants in England and Wales has warned that the proposals could place disproportionate obligations on taxpayers who are trying to comply.
ICAEW argues that the government should first do more to reduce uncertainty in the UK tax system. This could include simpler legislation, clearer HMRC guidance and more effective tax-clearance procedures.
It has also recommended that the regime should not yet be extended to individuals and trusts. In ICAEW’s view, the government should first complete its review of the UK’s personal offshore anti-avoidance legislation and introduce any resulting reforms.
ICAEW does not support including Inheritance Tax in the expanded regime. Inheritance tax planning may take place many years before a tax liability arises, and the final result can depend on future events.
For example, a lifetime gift may create no inheritance tax charge if the person making the gift survives for the required period. It may therefore be difficult to calculate whether an uncertain interpretation produces a £5 million tax difference when the original planning takes place.
ICAEW also opposes the proposed additional reporting trigger. It believes that existing professional and HMRC standards already prevent taxpayers and advisers from relying on speculative interpretations without a credible legal basis.
Potentially, but only in a limited number of high-value cases.
The government proposed including all types of trust rather than defining a separate category of “wealthy” or “large” trust. However, an uncertainty would generally need to create a UK tax difference of more than £5 million before notification was required.
The proposals could be relevant where a trust holds substantial UK property, shares in a valuable family company or a large international investment portfolio with a UK tax connection.
Possible areas of uncertainty may include:
whether a trust is UK resident;
whether UK anti-avoidance rules attribute income or gains to a settlor or beneficiary;
the tax treatment of capital distributions;
whether a transaction produces income or a capital gain;
the availability of a relief or exemption;
the value and tax treatment of assets transferred into or out of a trust; and
the inheritance tax treatment of lifetime transfers or trust charges.
A trust does not become reportable simply because its assets are worth more than £5 million. The relevant test concerns the difference in UK tax produced by competing interpretations of the law.
ICAEW has specifically asked HMRC to clarify how the proposed rules would apply to offshore entities that the UK treats as equivalent to trusts, including Liechtenstein foundations.
The legal form used in the home country may not determine its UK tax classification. HMRC may examine the entity’s governing documents, the rights of its founder and beneficiaries, and the powers of its governing body.
A European foundation could therefore have UK trust-like tax consequences even though it is not called a trust locally.
A normal investment holding company would continue to be tested under the rules for companies.
Under the present framework, a company generally needs UK turnover above £200 million or a balance-sheet total above £2 billion before the uncertain tax treatment regime applies. The uncertain treatment must also produce a tax advantage above the £5 million threshold.
Most personal investment companies will therefore remain outside the regime.
However, the wider structure still needs to be considered. A separate reporting question could arise at the level of an individual shareholder, a trust that owns the company, or another entity treated as a trust for UK tax purposes.
The company’s residence, management, distributions and transactions with connected individuals may also create separate UK tax issues.
A review may be appropriate where there is:
a trust or foundation holding high-value UK assets;
significant UK residential or commercial property;
a family member who has moved to or from the UK;
a UK-resident settlor, beneficiary, director or investment decision-maker;
planned sales or reorganizations producing substantial capital gains;
large lifetime gifts or succession planning involving UK assets;
competing professional opinions on the UK tax treatment; or
a structure that relies on legislation for which HMRC guidance is limited.
The presence of one of these factors does not automatically create a notification requirement. It does, however, increase the importance of identifying the UK tax position and recording the reasons for the treatment adopted.
No new obligation should be assumed until legislation is enacted. The government is expected to publish its formal response following the consultation, with any legislation intended for a future Finance Bill.
Nevertheless, those with high-value should not wait until a tax-return deadline to investigate their structure.
Trustees, company directors and individuals should ensure they understand:
which parts of the structure have a UK tax connection;
how each foreign entity is classified for UK tax purposes;
whether HMRC has published a clear position;
whether advisers in different countries have reached different conclusions;
how large the possible UK tax difference could be; and
what documents support the treatment used in the relevant return.
Contemporary records are especially important. Years later, successors or advisers may not have access to those who designed the original arrangement.
The proposals are aimed at tax differences above £5 million, so they are unlikely to affect most taxpayers.
However, they reflect a wider direction in UK tax policy: HMRC wants earlier disclosure of high-value tax positions and greater transparency around international structures.
For those with substantial UK interests, the key risk is not simply the creation of another form. It is discovering too late that HMRC classifies a foreign structure differently, disputes the interpretation used, or expects evidence that was never retained.
An early cross-border review can identify uncertainty, improve supporting documentation and reduce the risk of penalties or a prolonged HMRC enquiry.
Concerned about your trust, foundation or holding company with a UK connection? Contact W-V Law Firm for a free initial consultation.
