Readers' forum: Loan benefit

A non-resident trust was set up in Jersey by a non-resident UK domiciliary. The settlor is a long-term resident of South Africa and the trust was established primarily for South African tax purposes with the settlor as a beneficiary. The settlor’s adult son is also a beneficiary and was resident in the UK at the time the trust was created so a claim to the motive defence has been taken to be a non-starter.

The trust received funds as loans from a British Virgin Islands (BVI) company which in turn had received its money by issuing shares at a substantial premium to the settlor who was the sole owner. The trust was terminated in 2017-18 and all its assets including an interest-free loan to the son were used to repay the trust’s loans to the BVI company. The BVI company then redeemed the shares the...