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 a register, and the registration duty attaches to most 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. The same 90 day window applies to taxable trusts created on or after 6 April 2021.
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, and they are narrower than trustees expect. Statutory trusts imposed by law or court order are out, as are pension scheme trusts and will trusts wound up within two years of death. The general exclusion for small trusts requires the trust to hold no UK land, assets under £2,000, cumulative property under £10,000 and income under £5,000, with no tax liability. 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. HMRC’s guidance states that where the trustees pay on a lifetime transfer into the trust the rate is 20 per cent, and that inheritance tax is charged up to a maximum of 6 per cent on assets transferred out of a trust, with a charge arising at each ten year anniversary. The nil rate band against which those charges are computed is the inheritance tax threshold of £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. 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.
The consequence for European assets is direct and continuing. Excluded property status is no longer fixed at the moment of settlement. It moves with the settlor’s residence, year by year, 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. The Netherlands ratified 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.
The list of parties is short. 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, and the Belastingdienst expressly names family trusts alongside Liechtenstein Stiftungen and Anstalten, Antillean private fund foundations and Dutch private foundations as arrangements within the regime. The rule of attribution is set out in article 2.14a of the Wet inkomstenbelasting 2001, and the Belastingdienst states it plainly: the assets of an APV are attributed to the person who contributed them, and after that person’s death to the heirs, each for their share.
There is an exception where the fund is itself subject to a profits tax, on the terms article 2.14a lays down, and whether a particular trust falls within it is a question to be settled on the fund’s own tax position rather than assumed from the fact that it is taxed somewhere. The general position, though, is that a Dutch resident settlor or a Dutch resident heir reports the trust fund as their own, in their own return, regardless of what 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, which requires member states to maintain beneficial ownership registers including for trusts administering assets in their territory.
The scope of access to those registers changed materially in 2022. In joined cases C-37/20 and C-601/20, decided on 22 November 2022, the Grand Chamber of the Court of Justice held invalid the provision under which beneficial ownership information on companies incorporated in member states was accessible in all cases to any member of the general public, on the ground that the interference with the rights guaranteed by Articles 7 and 8 of the Charter was neither limited to what was strictly necessary nor proportionate.
What the judgment did not do is reduce the trustees’ duty to file. The obligation to disclose settlors, trustees, protectors and beneficiaries to the competent authorities survives intact in every jurisdiction concerned. What changed is who can read it afterwards, and 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.