25 Mar 2018

Trust exit charges after Panayi

08 November 2017

This way out


  • Do exit charges represent a restriction on the EU freedoms of establishment and capital.
  • Effect of TCGA 1992, s 80 on trustees who move overseas.
  • Previous case law decreed that exit charges on a company were acceptable.
  • Panayi trustees asked whether exit charges should apply to trusts.
  • European Court said it should be possible to defer payment of charges.

For many years, advisers have questioned whether the UK’s – admittedly few – capital gains tax exit charges are proportionate and legal or whether they represent a restriction on both freedom of establishment (Art 49 of the Treaty on the Functioning of the EU) and free movement of capital (Arts 63 to 66) – two of the EU’s four fundamental freedoms.

The UK has only four true exit charges. There are tax reliefs that may be clawed back if the recipient becomes non-UK resident within particular time limits, but these are outside the scope of this article.

Legislative references are to TCGA 1992 unless otherwise stated.


Charge on assets

Section 25 applies to the disposal of an asset by a non-UK resident who carries on a trade, profession or vocation in the UK through a branch or agency for individuals or permanent establishment (PE) for companies if, at the time of the disposal:

  • the trade continues to be carried on through the UK branch, agency or PE;
  • the asset is in the UK; and
  • it has previously been in use for the purposes of the trade or held for the purposes ...

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