A British family that owns property, shares or a business in continental Europe and settles those assets on a UK trust has done something entirely ordinary in its own legal system and slightly alarming in most others. The trust is the standard instrument of English succession planning. In the majority of European civil law jurisdictions it does not exist as a domestic institution at all, and the question of what happens to the assets is answered by a mixture of private international law, local anti-avoidance provisions and, increasingly, registers.
The result is that the same arrangement has to satisfy three different systems that were not designed to speak to each other. The trustees have British registration and reporting duties. The trust fund sits inside a British inheritance tax regime that changed fundamentally on 6 April 2025. And the state where the assets are located may decline to see a trust at all, and may instead attribute everything back to the person who settled it.
Registration is now the ordinary case
The Trust Registration Service is no longer a tax filing obligation. It is an anti-money laundering register, and the registration duty attaches to most UK resident express trusts whether or not they pay any tax. HMRC’s guidance sets a deadline of 90 days for non-taxable trusts created after 6 October 2020, running from creation or from the date the trust becomes liable for tax, with a backstop of 1 September 2022 where that is later. Taxable trusts created on or after 6 April 2021 have the same 90 days and the same backstop, but their clock starts when the trust becomes liable for tax, not at creation.
Older taxable trusts follow the tax calendar instead. Where a pre-6 April 2021 trust first becomes liable to income tax or capital gains tax, registration is due on or before 5 October in the following tax year, and where it has been liable before, on or before 31 January in the following tax year. Liabilities to other taxes, including inheritance tax, carry the 31 January date.
There are exclusions, set out in Schedule 3A to the Money Laundering Regulations 2017, and they are narrower than trustees expect. Trusts imposed by an enactment or by order of a court are out, as are registered pension scheme trusts and will trusts in the two years after the death, and the last of those holds only while the trust holds nothing but the estate property. Every one of them falls away the moment the trust is liable to UK tax. The general exclusion for small trusts, which only entered the Schedule in June 2026, requires no interest in UK land, no assets of appreciable worth above £2,000 in total, cumulative property never above £10,000 and income no more than £5,000 a year, and it is available for one trust per settlor only. A trust holding a French apartment or a Dutch shareholding will not come close.
The tax regime the fund sits in
Most trusts of this kind are relevant property trusts, and the charging pattern is the point that clients find counterintuitive because it is periodic rather than event driven. On a lifetime transfer into the trust HMRC puts the rate at 20 per cent where the trustees pay it, and higher where the settlor pays, because the transfer is then grossed up. Section 64 of the Inheritance Tax Act 1984 charges the fund at every ten year anniversary, and section 66 sets the rate at three tenths of the effective rate on a notional lifetime transfer. The 6 per cent clients hear quoted is therefore not a nominal rate but the ceiling on an effective one, three tenths of the 20 per cent lifetime rate. HMRC’s manual puts the anniversary charge at a rate that may be anything up to 6 per cent, and exit charges are a fraction of it. All of it is computed against a nil rate band that the table in Schedule 1 still sets at £325,000.
For a European asset the arithmetic is rarely the difficulty. The difficulty is that the charging events are British and the asset is not, so the trustees must value foreign real estate or an unquoted foreign company every ten years, and must fund a sterling liability from an asset they may not be able to sell in part. A trust holding one Italian villa and nothing else has a decennial funding problem built into it from the day it is created.
In one mandate we reviewed a settlement whose only substantial asset was a European operating company held through a local holding vehicle. The trustees had never obtained a formal valuation because no distribution had ever been made, and the ten year anniversary arrived with no agreed basis for the figure and no liquidity anywhere in the fund. The tax analysis was straightforward. The problem was entirely one of timing and cash, and it had been foreseeable from the deed.
What changed on 6 April 2025
Until then the question of whether foreign assets in a settlement were outside the British net turned on the settlor's domicile when the property became comprised in the settlement. Section 48(3) to (3F) of the Inheritance Tax Act 1984 was omitted with effect from 6 April 2025, and section 45 of the Finance Act 2025 inserted section 48ZA in its place.
The new test is residence. Where the settlor is alive, property situated outside the United Kingdom comprised in a settlement is excluded property when the settlor is not a long-term UK resident. Where the settlor died on or after 6 April 2025, the test is whether the settlor was not a long-term UK resident immediately before death. Only where the settlor died before 6 April 2025 does the old domicile test at the time the property entered the settlement continue to apply. Two carve-outs cut across those three tests, and they do not cut across all three alike. Where a long-term UK resident is beneficially entitled to a qualifying interest in possession, the statute disapplies only the living settlor limb and the post-April 2025 death limb, so a settlement whose settlor died before 6 April 2025 keeps the old domicile test even where the life tenant is resident today, although HMRC’s manual states the point without that restriction. The second carve-out does reach all three limbs, but only where two conditions are met together, namely that an individual has been beneficially entitled to an interest in possession in the property while a long-term UK resident on or after 6 April 2025, or while domiciled in the United Kingdom before that date, and that the entitlement arose from a disposition made on or after 5 December 2005 for a consideration in money or money’s worth. All three limbs give way to Schedule A1 where the value of the overseas property is attributable to UK residential property or, with effect from 6 April 2026, UK agricultural property. An individual is a long-term UK resident at all times in a tax year if UK resident for at least 10 of the previous 20 tax years, unless section 6A releases them after ten consecutive non-resident years, or after the shorter run of three to ten years that the table in that section fixes by reference to how long they were resident before leaving.
The consequence for European assets is direct and continuing. Excluded property status is no longer fixed at the moment of settlement. It follows the settlor’s residence and is tested afresh at the date of each chargeable event, for as long as the settlor lives. A settlement created by a non-resident settlor holding Spanish or German assets can come into the relevant property charge simply because the settlor spent too many years in London, without any transaction at all having occurred.
Recognition, and the states that never signed
The Hague Convention of 1 July 1985 on the Law Applicable to Trusts and on their Recognition is the instrument that makes a common law trust legible in a civil law state. The United Kingdom ratified it on 17 November 1989, in force from 1 January 1992, and the Netherlands on 28 November 1995, in force from 1 February 1996, which is one of the practical reasons Dutch practice deals with foreign trusts more comfortably than most of the continent. In Britain the Convention has the force of law under the Recognition of Trusts Act 1987.
The list of parties is short, fourteen in all. Among European Union member states, Italy, Luxembourg, Cyprus, Malta and the Netherlands are parties. France signed the Convention on 26 November 1991 and never ratified it. Germany, Spain, Belgium, Poland and the other member states are not parties at all.
Non-ratification does not mean a trust is void in those states. It means there is no agreed framework for determining the applicable law, for recognizing the separation of the trust fund from the trustee’s own estate, or for registering trustees as such against local title. Each question is answered by the local court under general private international law, and answered again by the local tax authority under its own rules, with no guarantee that the two answers agree.
The Dutch answer: look through it
The Netherlands is a party to the Convention and yet does not allow a trust to defer Dutch taxation of the family that created it. The two positions coexist because recognition and taxation are separate exercises.
Dutch law treats a family trust as an afgezonderd particulier vermogen, a segregated private fund. The explanatory memorandum to the bill that created the regime calls the Anglo-American trust the best known example and then opens the category out to foreign Stiftungen and Anstalten, Antillean private fund foundations, Treuhands and Dutch foundations pursuing no general or social interest, closing the list with an et cetera rather than a full stop. The criterion is not the label but whether the fund pursues a private interest that is more than incidental. Article 2.14a of the Wet inkomstenbelasting 2001 attributes its assets and debts, and its income and expenditure, to the person who segregated them, and after that person’s death to the heirs, each in the proportion in which he inherits.
Three limits keep the definition from swallowing everything, and none of them is the one advisers reach for first. There is no segregated private fund where shares, profit certificates, membership rights or comparable rights were issued against the contribution, or where an economic entitlement arose. And attribution does not reach assets, debts, income or expenditure shown to belong to a business carried on by the fund, to the extent the profit of that business is also shown to be subject to a profits tax in the state where it is carried on. That is narrower than an exemption for funds taxed somewhere, and the burden of showing it falls on the taxpayer. The third limit protects the heir rather than the fund, because the attribution to heirs does not apply to an heir who shows that neither he nor his partner is a beneficiary of the fund in law or in fact, directly or indirectly, and that neither of them can become one, in which case the fund is attributed to the remaining heirs as though that heir had been excluded from the succession. It has to be invoked and proved, and it does not operate on its own. A separate rule runs the other way, because a person who has been disinherited still counts as an heir where he, his partner or a relative in the direct line by blood or marriage is a beneficiary. Otherwise a Dutch resident settlor or a Dutch resident heir reports the trust fund as their own, in their own return, whatever the trust deed says about entitlement.
Registers on both sides, and the limits on who sees them
Trustees of a UK trust with European assets are now typically registered twice. The British register is the Trust Registration Service. The European registers arise from anti-money laundering legislation, and article 31 of Directive (EU) 2015/849 requires member states to maintain beneficial ownership registers for express trusts. Where the trustee is established outside the Union, which is what a British trustee now is, the register is that of the member state where the trustee enters into a business relationship or acquires real estate in the name of the trust, so the trigger is a transaction and not the location of the asset.
What changed materially in 2022 was public access to the company registers, not access to the trust registers. In joined cases C-37/20 and C-601/20, decided on 22 November 2022, the Grand Chamber of the Court of Justice held article 1(15)(c) of Directive (EU) 2018/843 invalid in so far as it amended article 30(5) of Directive 2015/849 to require that beneficial ownership information on companies and other legal entities incorporated in member states be accessible in all cases to any member of the general public. Public access had not been shown to be strictly necessary, and the interference with the rights guaranteed by Articles 7 and 8 of the Charter was not offset by any corresponding gain against money laundering.
What the judgment did not do is reduce the trustees’ duty to file. It ruled on article 30, which covers companies and other legal entities; article 31, which governs trusts, was untouched, and the duty to hold the identity of the settlors, the trustees, any protector, the beneficiaries or class of beneficiaries and any other natural person exercising effective control survives intact. Who can read a trust register afterwards is settled not by the judgment but by article 31(4) of the Directive, which as amended in 2024 gives access to competent authorities and financial intelligence units without restriction, to obliged entities carrying out customer due diligence, and to any natural or legal person that can demonstrate a legitimate interest. That is a privacy point rather than a compliance point.
What has to be true before European assets go into a trust
Three questions decide whether this structure works, and none of them is answered by the trust deed. The first is whether the state where each asset is located recognizes trusts at all, because if it does not, the trustee will be dealing with a local registry, a local notary and a local court that have no category for what the trustee is. The second is whether that state attributes the fund back to the settlor or to the beneficiaries under its own rules, as the Netherlands does through the APV regime, because if it does, the trust achieves nothing locally and adds a layer of reporting.
The third is the settlor’s own residence over time, which since 6 April 2025 determines whether the foreign assets are excluded property at all. That is the question that has changed most and the one most existing settlements were not designed around. A trust set up on advice that was correct under the domicile rules is not automatically correct under section 48ZA, and the review that establishes which it is has to be done on the settlor’s residence history rather than on the deed.
This article is informational and does not constitute tax or legal advice. The treatment of any structure depends on its facts and on the law of each jurisdiction involved. Each engagement is subject to scope and applicable regulation.