Mauritius Trusts for UK Resident Families

A UK resident Mauritius trust is governed by Mauritian trust law but lived with in the United Kingdom. The trust deed, the trustee and the assets may be in Mauritius; the settlor and the beneficiaries are taxed, and reporting is owed, where they live. Most of the practical questions for a British family come from that split.

This page is general information, not advice. UK tax outcomes depend on residence, long-term residence status, the type of asset and the exact deed, so they must be checked with a UK adviser alongside Mauritian counsel.

Why UK residents look at a Mauritius trust

British expatriates and families with Mauritian ties tend to come to the island for similar reasons: a property or business there, children who may live in several countries, or a wish to place assets under a recognised trust law with a regulated local trustee. The legal basis is the Trusts Act 2001, which an offshore trust in the Mauritian sense relies on.

Two features matter early on for a UK settlor:

• A foreign settlor's transfer is protected from foreign succession rules. Under article 8 of the Trusts Act 2001, the transfer of a non-citizen settlor cannot be set aside under the succession rules of the settlor's domicile or nationality.
• The settlor may keep a role, but not the whole benefit. The settlor can also be trustee, beneficiary, protector or enforcer, yet cannot be the sole beneficiary of the trust they created.

Neither point switches off UK rules. A Mauritian trust can be valid in Mauritius and still be looked through, or taxed, in the UK.

UK transparency rules: the main point of attention

UK tax law contains anti-avoidance provisions that treat income or gains of an overseas trust as belonging to the person who set it up, or that tax benefits received from it. The detail is technical, but the questions a UK resident settlor should ask are consistent.

Is the settlor able to benefit?

If the settlor, their spouse or civil partner, or their minor children can benefit from the trust, UK law is likely to attribute trust income to the settlor even when the trustee is in Mauritius. A trust deed that excludes the settlor and their immediate family from benefit is treated very differently from a broad discretionary class that includes them. Review the class of beneficiaries with this in mind; the page on the discretionary trust explains how classes are drafted.

How much control does the settlor keep?

Reserved powers, a settlor acting as protector, or a letter of wishes that the trustee follows in practice can lead a UK tax authority to say the settlor retained control. They can also lead a court to ask whether the trust is a sham. The limits are covered in how much control a settlor can keep and sham trusts.

Under article 24 of the Trusts Act 2001, a protector can, unless the deed says otherwise, remove and appoint trustees, change the governing law and move the place of administration. That is a considerable amount of influence, and a UK settlor who is also the protector should expect it to be examined.

Where are the trust's own income and gains?

A distribution to a beneficiary is not treated the same way in the two countries. In Mauritius, under section 46(4) of the Income Tax Act, a distribution to a beneficiary is deemed to be a dividend for that beneficiary. The UK has its own rules on how payments and benefits from an overseas trust are taxed on a UK resident beneficiary, and the two characterisations do not have to match. The detail of the Mauritian side is on how trusts are taxed in Mauritius.

Inheritance tax and the offshore trust

Many British families ask whether an overseas trust takes assets out of UK inheritance tax. There is no simple yes or no. UK inheritance tax is concerned with who owns the assets, who set up the trust, where the settlor is resident, and whether the settlor kept a benefit. The location of the trustee is only one input.

Points that usually decide the outcome:

• whether the transfer into the trust was a completed gift or the settlor kept an interest;
• whether the settlor is treated as a long-term UK resident when the transfer is made and when they die;
• whether the assets are situated in the UK or abroad;
• whether the trust is treated as a relevant property trust, with periodic and exit charges.

Mauritius does not give a UK resident settlor a way round these rules. The Mauritian trust is recognised in Mauritius; the UK decides separately how to tax it. For the Mauritian side of death and trusts, see what happens to a trust when the settlor dies and inheritance tax in Mauritius.

Succession: two sets of rules

A British family with Mauritian property meets two succession systems. Mauritian law applies forced heirship to Mauritian immovable property and to the estate of those governed by it, whereas English law gives wide testamentary freedom. A trust interacts with both.

Article 8 of the Trusts Act 2001 protects the transfer of a non-citizen settlor against the succession rules of their domicile or nationality. That does not answer how a Mauritian court would treat a trust holding Mauritian land, or how a UK claim under family provision law would be handled. Related reading: forced heirship and trusts and wills for foreigners owning assets in Mauritius.

Two further limits apply to property:

• Under article 19(3) of the Trusts Act 2001, the transfer of Mauritian real estate to a non-charitable purpose trust is void.
• A trust is presumed irrevocable by the settlor under article 11, unless the deed expressly provides for revocation. A deed drafted to be revocable may be treated differently by UK tax rules.

Reporting and information: what is held, and by whom

British families sometimes expect a Mauritian trust to be opaque. In practice, regulated structures carry real information duties.

The duties in article 38(3) extend to a non-resident foreign trust administered by the trustee. On the confidentiality position that results, see whether Mauritius trusts are confidential and the register of trusts.

For the UK resident, the practical consequence is that a Mauritian trustee will hold identity and address details for the settlor and beneficiaries, and the family should assume that UK reporting and the Mauritian records will be read side by side. Whether the trust, the settlor or a beneficiary must register or report in the UK depends on UK law and should be confirmed by a UK adviser.

If a company sits under the trust

Families often hold investments through a company. A company incorporated in Mauritius is treated as non-resident for Mauritian tax if it is centrally managed and controlled outside Mauritius (section 73A of the Income Tax Act), but it must still file a return under section 116. Conversely, under section 73 a company is resident in Mauritius if it is incorporated there or centrally managed there.

For a UK family this raises a question in both directions: where are the directors actually making decisions, and how does the UK view a company whose control sits in the UK? A Tax Residence Certificate can be requested from the Director-General of the Mauritius Revenue Authority, who must issue it within 7 days of the request once the required return has been filed and the fee paid.

A short decision path

Comparing the questions in each country

Practical checklist before a UK resident acts

• Confirm the settlor's UK residence and long-term residence position with a UK adviser
• Decide whether the settlor and close family are excluded from benefit
• Check which powers the settlor keeps and whether they are consistent with a genuine trust
• List the assets and where they are situated, including any Mauritian property
• Review the letter of wishes so that it guides the trustee without binding them
• Obtain advice on inheritance tax, income tax and capital gains for both countries
• Ask the FSC-licensed corporate service provider (Management Licence) which records it holds and which it reports
• Agree who will handle UK filings each year

If you would like a regulated provider to look at your situation, you can use the form on the contact page.