Time is running short for those who are contemplating a rebasing election because many such elections will need to be made by 31 January 2010.

Before 6 April 2008 gains made by non resident trusts and by non resident companies could not be attributed to (and taxed on) UK residents who were not domiciled in this country. Foreign domiciled individuals were exempt from those provisions. On 6 April 2008 the exemption was removed and foreign domiciliaries can now be taxed on such gains (but subject to remittance basis). However, it is possible for trustees to make a rebasing election so that all gains accrued on trust assets (and on assets held by any underlying company owned by the trust) up to 5 April 2008 will continue to be exempt from tax. The election has to be made by 31 January following the tax year in which a beneficiary has received a capital payment. With regard to the wide definition of a capital payment, it can be very difficult to identify whether a benefit has been received, but there seems to be no downside in making the election anyway as a precautionary measure. I have not been able to identify (nor am I aware of anybody who has identified) any disadvantage on making the election – providing of course the assets were not standing at a loss.

Whilst the rebasing election obviously has no effect on UK domiciled beneficiaries, you can never be sure that a beneficiary might become non domiciled – or a new beneficiary might appear or be appointed who is not UK domiciled.

It is important to note that the election is irrevocable and applies to all assets in the trust and underlying companies. The election only applies to trustees and not to assets held by individuals or by directly owned offshore companies.

The election has to be made on a special form RBE1, but no significant details need to be disclosed about the trust or the settlor beneficiaries.