The Terrorism (Protection of Premises) Act 2025 (the “Act”) – also known as Martyn’s Law, received Royal Assent on 3 April. The aim of the Act is to ensure that certain premises and events are better prepared to respond to terrorist attacks.
Although the law will not come into force for another two years, it has been introduced now to give property owners time to plan ahead and prepare for the new requirements.
The Act will affect a wide range of properties. To help you understand what it means for you, we’ve outlined the key points below.
Preparing for Martyn’s Law
The Terrorism (Protection of Premises) Act 2025, also known as Martyn’s Law, aims to ensure certain premises and events are better prepared to respond to terrorist attacks. Are your premises ready?
The Act applies to a variety of premises where a large number of people could be expected. This includes shopping centres, large retail units, restaurants, entertainment and leisure venues including theatres, cinemas and live music venues, hotels, health care settings and schools.
What are the requirements?
The Act sets out a tiered system based on how many people are reasonably expected to be at a property or event at the same time. What’s required depends on whether the property is classed as a standard duty premises or an enhanced duty premises.
Standard Duty Premises
These are premises where it’s reasonable to expect that between 200 and 799 people (including staff) might be present at the same time, at least occasionally.
Standard duty premises must have appropriate and reasonably practical procedures in place designed to reduce the risk of physical harm to those in the premises in the event of a terrorist attack. Examples include evacuation strategies, locking down premises and methods for communicating with those on the premises.
The procedures are expected to be simple, low-cost activities that staff are aware of and able to enact and there is no requirement to physically alter the premises.
Enhanced Duty Premises
These are premises, or ticketed events, where it’s reasonable to expect that 800 or more people (including staff) might be present at the same time, at least occasionally.
Enhanced duty premises are subject to additional requirements and must also have in place measures to reduce their vulnerability to a terrorist attack and to prevent harm in the event of a terrorist attack. Examples include monitoring of the premises and its immediate vicinity which could include CCTV and security controls, measures controlling those entering or leaving such as security scanners and bag searches and installing bollards to stop hostile vehicles.
The person responsible for enhanced duty premises must document these measures and assess how they are expected to reduce risk.
Who is responsible?
The person or organisation in control of the premises is responsible for ensuring compliance. If the premises are controlled by an organisation, a senior individual must be appointed to ensure the relevant requirements are met.
If you are a tenant of a standard duty premises or an enhanced duty premises you are likely to be deemed the responsible person as the person in occupation and control of the premises. In practice, most retail leases are likely to confer the requisite level of control.
Landlords and managing agents will need to review the position carefully. While tenants are likely be responsible persons for their own units, the legislation allows for multiple responsible persons. This is particularly relevant in multi-occupancy properties such as shopping centres, where landlords often retain control over common parts that provide public access to individual units. In such cases, landlords may also be considered responsible persons in respect of those areas.
What do I need to do?
Although the law won’t take effect until at least April 2027, now is the time to start preparing. The government has expressly said that the Act has been introduced now to give property owners time to plan.
If you own a property which may fall within the scope of the Act, you should start considering what steps may be needed to prepare. The government will be issuing further guidance to help property owners understand the requirements.
If you’re in the process of acquiring a property that could be affected, you should also consider the costs and steps that may be needed to prepare the property for the Act, and you should ask the seller what preparations they’ve made.
If you would like more information about the Act or its possible implications for your property, we’d be happy to help – please do get in touch with us.
Forsters shortlisted in three categories at the STEP Private Client Awards 2025
26 June 2025
News
Forsters’ Private Wealth team has once again been shortlisted in the STEP Private Client Awards, securing three nominations for the 2025 edition:
Private Client Legal Team of the Year (large firm)
Family Business Advisory Practice of the Year
Digital Assets Practice of the Year
Recognised globally as a benchmark for excellence, the STEP Private Client Awards celebrate outstanding achievements across the private client profession. Entries are judged by an independent panel of internationally respected experts in the Private Client arena, with a focus on innovation, technical skill and the ability to handle complex client matters.
These nominations reflect the breadth of expertise our team brings to our private clients – and the strength of the trusted relationships we build with them and our intermediary network.
This recognition continues Forsters’ strong track record at the STEP Private Client Awards, having been named a winner every year since 2018, including three wins at each of the last two ceremonies.
The winners will be announced at the awards ceremony on 18 September 2025.
Forsters named Team of the Year: Real Estate at The Lawyer Awards 2025
18 June 2025
News
Forsters’ Real Estate team picked up the prestigious Team of the Year: Real Estate title at this year’s The Lawyer Awards, held last night at the JW Marriott Grosvenor House Hotel.
Congratulations also to Senior Associate James Carpenter, who was shortlisted for Associate of the Year, and to everyone else whose work was celebrated.
Forsters appoints new partner Noel Ainsworth to establish Real Estate Funds practice
12 June 2025
News
Leading London law firm Forsters today announces the appointment of Noel Ainsworth as a partner in its Commercial Real Estate team, where he will establish a new Real Estate Funds practice. Noel will join the firm on 1 July 2025.
Noel joins from Shoosmiths and brings over 20 years’ experience in the private investment funds industry. Having previously held partner roles at Morgan Lewis & Bockius and Simmons & Simmons, as well as earlier positions at Debevoise & Plimpton and Linklaters, Noel has a strong track record advising clients on establishing real estate, real asset, debt, renewable energy, infrastructure and private equity funds and other investment structures. Noel also represents institutional investors on their fund investments, co-investments, and secondaries.
Victoria Towers, Head of Commercial Real Estate at Forsters, said: “Noel’s arrival signals an important milestone for our Commercial Real Estate Group. Adding his specialist real estate funds formation expertise is in direct response to client demand, as organisations increasingly transact using joint venture vehicles and offshore corporates, unit trusts and partnerships. We’re delighted that Forsters’ clients can now benefit from an all-encompassing Commercial Real Estate proposition, complemented by our strong Corporate and Tax offering.”
Noel comments: “Forsters’ fantastic reputation and remarkable client base in the real estate space made it the natural destination for the next stage of my career. I’m looking forward to working with my new colleagues to establish a first-class Real Estate Funds practice, and to helping cement the team’s standing as a centre of excellence for real estate.”
Natasha Rees, Senior Partner at Forsters, added: “It is clear that Noel will be a great fit at our growing firm. His expertise will add a valuable new dimension to our Commercial Real Estate team, which is already well known in the market for the strength and depth of its expertise. We look forward to welcoming Noel to the firm.”
Before you go: Smart steps for a smooth executive departure
5 June 2025
News
It is that time of year when 2024/2025 annual bonuses are about to be paid out and many senior executives begin to consider their next move. If you’re thinking about leaving your role, this guide offers practical tips to help you prepare and negotiate a smooth and dignified exit.
Start with the end in mind
It may feel odd to plan your exit from a business before you’ve even started employment – but it will help you in the long run. Exit terms should be a key consideration when negotiating employment contacts because they generally contain detailed and one-sided provisions to protect the business’s interests as fully as possible. Your employment contract should protect your interests, not just the employer’s. Before signing, make sure it reflects any promises made and includes terms that work for you.
Here are the key points to consider before entering into an employment contract:
Check the notice period – is it too short or too long and are there any garden leave and payment in lieu of notice provisions? If you are under notice for any reason, do you remain eligible for payment of a bonus and/or other awards? If bonuses are not payable when notice has been served by either party, you could seek to negotiate the exclusion of the provision for certain types of departure, for example if you are served notice because you have been made redundant, your exit has been mutually agreed or you cannot work because of incapacity.
Carry out a detailed review of any additional documents – particularly those that govern bonus schemes, long term incentive plans (LTIP) and any other types of awards to ensure you fully understand the rules, any malus and clawback provisions, good leaver/bad leaver provisions and any defined exit events. You should also establish whether there is any discretion for the business to treat you as a good leaver if, for example, you mutually agree your departure and you do not automatically fall within the good leaver definition.
If any bonus or award is conditional on a specific exit event – if there is a sale or initial public offering, you will need to consider your exit timing carefully and any steps you can take to protect yourself from being dismissed shortly before an exit event. If, for example, you are leaving under a settlement agreement initiated by the business, you may wish to ask for a warranty that your employer is not aware of any of any matters that are likely to lead to an exit event or a guaranteed bonus payment if an exit event occurs within a short, specified period after the termination of your employment.
Have you checked the restrictions? How long are they? Is any period of garden leave set off against the restricted period? Many employers will have well-drafted and fairly standard restrictive covenants in senior employment contracts, however, the restrictions may need to be amended to take into account your specific circumstances. For example, if you are going to be bringing your own established business and/or contacts that you have built up over the years, there will need to be carve outs in the restrictions. There may also be additional restrictive covenants embedded in bonus and award schemes which can differ to those set out in the employment contract both in scope and duration so it is important to check those too. Any agreement to modify, reduce, or waive restrictions as part of entrance or exit discussions should therefore extend to any LTIP and award restrictions wherever possible.
Consider the vesting periods for any LTIPs – which are usually three years and seek clarity on whether there is flexibility for the business to accelerate vesting or pro-rate awards under the LTIP scheme in certain circumstances such as redundancy or an agreed departure.
Seek legal advice – before entering into the employment contract in connection with any on any post-termination restrictions, bonus, LTIP and award scheme rules, and other award schemes and any overly onerous or unusual provisions.
Exit timing and strategy
If you wish to initiate an exit, you should carefully consider the implications first. In particular:
Would you need to repay any bonuses and/or would you have to forfeit unvested awards or carried interest and future awards? Depending on your bargaining position with any new employer, it may be possible for you to negotiate your new employer buying out the awards and guaranteeing a first-year bonus as part of your new contract.
How can you protect your personal reputation in the market and the business? You may wish to seek to agree any informal and formal communications about your departure both internally and externally during the negotiation process.
Are there any regulatory issues in respect of you personally and/or the behaviour of the individuals responsible for or involved in your exit? For example, is there any conduct issue which might call into question a person’s fitness and propriety under the Senior Managers and Certification Regime or is there anything which might impact a regulatory reference?
If you believe you are being pushed or managed out of the business, you should seek legal advice immediately so that protective action can be taken, especially if the circumstances could give rise to unfair dismissal, whistleblowing, a discrimination claim and/or any regulatory issues. It is essential to act quickly in these situations, even if you are already engaging in settlement discussions with the business.
Whether you’re negotiating a new role or planning your departure, seeking legal advice is essential. Employment contracts, bonus schemes, and exit terms can be complex—and the stakes are high. Having the right legal guidance ensures you’re protected, informed, and in the strongest possible position.
At Forsters, our employment team has extensive experience supporting senior executives through every stage of a career move—from onboarding to exit. If you’re considering a transition or want to review your current arrangements, we’re here to help.
“Outstanding legal leadership” – Forsters’ Asia team wins Legal team of the Year at WealthBriefingAsia Awards 2025
5 June 2025
News
Forsters’ Asia team is proud to have been named ‘Legal team of the year’ (Southeast Asia) at the 2025 WealthBriefingAsia Awards, which took place on 5 June at The Fullerton Hotel, Singapore.
Our team were selected for their unique approach to advising high-net-worth individuals and families, trustees and family offices in the region on international cross-border estate and succession planning.
The judges commented:
“Recognised for outstanding legal leadership in Southeast Asia, this team demonstrated unrivalled capability in handling billion-dollar family governance, cross-border disputes, and strategic real estate projects. Their integration of legal insight with psychological understanding, combined with innovation in crypto and ESG, marks a new benchmark in private wealth legal services.”
The annual WealthBriefingAsia Awards showcase the most exceptional firms, teams and individuals in the region. The awards have been designed to recognise outstanding organisations, who have demonstrated ‘independence, integrity and genuine insight’.
Forsters’ dedicated Asia team
With an established track record in Southeast Asia, stretching back 33 years, Forsters’ Asia team are renowned for their expertise across multiple areas, spanning private wealth, residential and commercial real estate, trust and estate disputes, immigration and family.
Winning this award reflects Forsters’ continued commitment to serving individuals, families and organisations in Asia and follows the team’s recognition last year as “Estate Planning Team of the Year”. The team travel to the region regularly to advise clients and have formed close relationships with many of the region’s top private wealth advisors. Our team takes a unique approach to each client, making it a priority to understand the psychology of the families, individuals and organisations they advise alongside the technical aspects.
Forsters advises on Build to Rent acquisition for real estate investment platform Farlane Capital
3 June 2025
News
Forsters’ Build to Rent (BTR) team has continued to advise valued client Farlane Capital, a real estate investment platform operating in the UK Living sector, on their latest BTR acquisition.
We advised Farlane Capital on the acquisition of the shares in the company that owned two residential tower blocks that comprise 213 units in the Sherriff’s Gate development in Worcester. The blocks were purchased ready to be occupied, with all Building Safety Act requirements cleared. Across our Commercial Real Estate, Corporate, Tax, Banking, Planning and Construction teams, we advised on all aspects of the acquisition including the terms of the share acquisition itself, construction, planning, estate structuring, tax aspects and in addition, on a £25.7 million debt financing package and refinancing of existing lenders.
The BTR blocks are the first of its kind in Worcester and are set to boost the supply of quality housing in the local area.
Grant Livingston, Founder of Farlane Capital said “with the numerous moving parts in any real estate transaction, I need to have the trust and confidence in my legal team. The balance of being detail orientated whilst remaining commercial is crucial and Forsters achieved exactly this.”
Family Limited Partnerships: A lifeline in the IHT storm
1 June 2025
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In this article, we consider the impact of changes to UK inheritance tax (IHT) on the use of trusts by UK resident Americans and explore the use of family limited partnerships (FLPs) as an alternative vehicle for wealth planning.
Impact of changes to IHT since April 2025
Changes to IHT took effect on 6 April 2025 will be a significant concern to many UK resident Americans. After ten consecutive (or ten out of the prior 20) tax years of UK residence, those who come to the UK from the US will become exposed to IHT on their worldwide assets. IHT is charged at a flat rate of 40% on death to the extent that the value of the deceased’s estate exceeds his or her available ‘nil rate band’ (NRB) amount of up to £325,000.
While those who are US citizens or domiciliaries will already have a worldwide exposure to US estate tax at up to 40% on death (and, in principle, the treaty between the US and the UK should prevent double taxation) the UK exposure represents a real additional tax cost. This is down to the size of the US federal estate tax exemption that is currently available to US citizens and domiciliaries, of up to $13.99m per individual in 2025 (and due to increase to $15m in 2026). In effect, the worldwide IHT exposure gives rise to an additional tax liability equal to 40% of the difference between the available NRB amount and the available US estate tax exemption of the deceased (or the total value of their estate if it is less than the available US exemption) on death. Based on a USD:GBP exchange rate of 1: 0.75, this represents a real additional tax cost of up to $5.42m per individual estate.
Historically, many UK resident Americans who were expecting to remain in the UK long enough to acquire a worldwide exposure to IHT (which would occur after 15 years of UK residence under previous rules) would have taken steps in advance of the change to mitigate the adverse implications. Most commonly, they would do this by transferring some or all of their non-UK assets into trust. By doing so, under IHT rules at the time, they could shelter those assets from IHT indefinitely, even if they were able to benefit from the trust. Under new rules, this planning will no longer be effective where the trust is funded on or after 30 October 2024. Instead, the trust assets will form part of the settlor’s estate for IHT purposes on death unless the settlor is excluded from benefit irrevocably. The trust assets will also be exposed to IHT charges of up to 6% every ten years and on ‘exits’ (such as capital distributions) from the trust between ten-year anniversaries for so long as the settlor retains a worldwide exposure to IHT.
There may still be opportunities for US citizens and domiciliaries (who are not also UK citizens) to leverage the US-UK estate and gift tax treaty to protect their non-UK assets from IHT through transfers into trust, but the scope for this is now significantly more limited than it has been previously. Therefore, UK resident Americans who are concerned about IHT will want to explore alternative planning strategies.
Considering alternative IHT planning strategies
It will, of course, remain important to think about how assets can pass efficiently on death. As a minimum, married couples should look to structure their wills in a way that allows access to the spouse exemption from IHT on the first death, postponing any IHT liability until they have both died. If both spouses are in good health, they may find they are able to obtain life insurance on their joint lives relatively cheaply to cover the IHT bill that arises on the second death. This can be a good option alone where substantial lifetime gifts are not viable, or it can be used in combination with a gifting strategy. Life policies taken out for this purpose should be written into trust to prevent the death benefit itself from being subject to IHT.
Potentially Exempt Transfer (PET) regime remains intact
Contrary to speculation in the run-up to the 2024 Autumn Budget, the UK’s PET regime remains intact following the April 2025 changes. This regime allows outright gifts in any amount to be made free of IHT if the donor survives the gift by seven years (with a reduced rate of IHT applying if the donor survives by more than three but less than seven years). Making PETs can be a powerful IHT planning tool in the right circumstances. In theory, this could allow a person to give away everything they have free of IHT during lifetime! However, there are important non-tax considerations to factor in.
First, the donor must be able to afford to give the relevant assets away. Anti-avoidance rules (known as the ‘gift with reservation of benefit’ rules) prevent the donor from ‘having his cake and eating it’, so it will be critical for the donor to cease his own enjoyment of the relevant assets at the time of the gift. Secondly, the donor must be prepared to make the gift with ‘no strings attached’. The gift must be absolute, and the donee must be free to do as he chooses with the relevant assets, which will belong to him. The donor is required to give up all formal control and ownership rights upon making the gift, which could reduce the appeal of this planning where there are concerns regarding asset protection and/or how the relevant assets will be used by the donee.
Family Investment Company (FIC) structures
This dilemma has led many to explore the use of structures through which the PET regime can be leveraged while at the same time incorporating some of the control and asset protection benefits associated with trusts. A popular structure has been the FIC. As the name suggests, a FIC is a private company that is created for the purposes of holding investments for a family. The allocation of shares and the associated rights of shareholders can be tailored to the family’s needs and can allow the division of voting control and economic interests between different generations. Gifts of shares (or funds for children to subscribe for shares) in the FIC will be PETs for IHT purposes, but control mechanisms can be built in via the company’s articles and by agreement between shareholders, which can make this option more attractive than making outright gifts of cash.
However, the use of FICs presents various challenges for American donors and donees. Active steps would need to be taken to prevent the FIC becoming entangled in penal US anti-avoidance rules that apply to ‘passive foreign investment companies’ (PFICs). Where the PFIC regime applies, the US imposes onerous income tax and interest charges on certain distributions and profits made by the FIC. Even if this can be managed (for instance, by making a ‘check the box’ election to make the entity transparent for US tax purposes), the structure presents a risk of double taxation if profits are extracted from it by UK resident family members. This generally limits the effectiveness of the planning to scenarios where the family can afford not to benefit from the FIC while they are UK resident.
The appeal of FLPs
FLPs can offer similar non-tax advantages to FICs, but without the same penal anti-avoidance rules and double tax risks. This is because an FLP is, by default, transparent for tax purposes in both the US and the UK. Therefore, the partners are subject to tax on their respective shares of the partnership’s income and gains directly as they arise.
How do they work?
In a typical FLP structure, the parent/grandparent will fund the FLP in exchange for limited partner (LP) and general partner (GP) interests. The GP interest (to which minimal economic value will be attributed) will hold the management rights, including strategic decision-making powers and control over the FLP’s distribution policy. The GP interest will often be held through a limited company to provide de facto limited liability. LP interests (including a pro-rated share of profits) will be given by the parent/grandparent to his children/grandchildren. A partnership agreement will be put in place that is bespoke to the family’s requirements. This is likely to incorporate control mechanisms and seek to provide a degree of asset protection for the partners – e.g. by incorporating limits on transfers of interests, admission to the partnership, redemption of capital, exercise of voting rights, etc. The GP interest will sometimes be retained by the donor, but more often will be transferred to a spouse or third party to mitigate the risk of the donor reserving powers that prevent the gifts from being ‘completed’ for US transfer tax purposes.
Tax considerations
No liability to tax should arise in the US or the UK on the initial funding of the FLP by the donor because there will not be any change to the beneficial ownership of the underlying assets. From a transfer tax perspective, the gifts of the LP interests will be PETs for IHT purposes, so will pass free of IHT if the donor survives the gifts by seven years. If the donor is a US citizen or domiciliary, the gifts will also be subject to US gift tax, but no liability will arise if the value of the gifts falls within the donor’s available exclusion amounts. When assessing the value of the gifts for tax purposes, there may be discounts available for minority interests and lack of marketability. Future growth on the assets will occur outside the donor’s estate for IHT and US estate tax purposes.
Although the gifts of the LP interests will not constitute ‘gain recognition events’ for US income tax purposes, they will represent disposals of the underlying assets for UK capital gains tax (CGT) purposes. This could mean it is preferable to fund the FLP with cash or, where the FLP is funded with assets in specie, to structure the transfers as gifts of cash, followed by sales of the LP interests. The sales will trigger tax on uncrystallised gains in both the US and the UK, but relief should be available under the US-UK income tax treaty to prevent double taxation.
Non-tax considerations
FLPs offer a mechanism to pass wealth to younger generations while retaining a degree of control and protection over the underlying economic interests. In many respects, this separation of control and economic ownership is reminiscent of a trust structure, which is attractive. However, this must be balanced against other non-tax considerations related to the use of FLPs. In particular:
Because FLPs are transparent for tax purposes, they will give rise to tax liabilities for the limited partners, even if no distributions are made. This exposure to tax on the profits of the FLP means the limited partners will require full transparency regarding the finances of the partnership, to enable them to comply with their personal tax reporting obligations. There will be little mystery as to the value of their interests!
There will be substantial professional costs associated with the setup and maintenance of the structure, including annual compliance costs for the FLP and its partners.
Historically, there have also been concerns that the general partners of FLPs might require regulatory oversight by the Financial Conduct Authority (FCA). However, the FCA has indicated that this is not necessarily the case for family FLPs.
In a nutshell:
Recent changes to UK inheritance tax will be a concern to many UK resident Americans, who may want to explore new IHT planning strategies. For UK tax reasons, the use of trusts as vehicles for lifetime gifting may be unappealing for those that are not able to benefit from relief under the US-UK estate and gift tax treaty. While UK tax rules favour outright gifts as an IHT planning tool, there are non-tax factors that can prohibit or limit the appeal of lifetime giving. FLP structures can offer a tax-efficient and flexible solution, which balances the desire to reduce the size of the donor’s estate with the need for a controlled transfer of wealth to younger generations.
Disclaimer
The members of our US/UK team are admitted to practise in England and Wales and cannot advise on foreign law. Comments made in this article relating to US tax and legal matters reflect the authors’ understanding of the US position, based on experience of advising on US-connected matters. The circumstances of each case vary, and this article should not be relied upon in place of specific legal advice.
Your guide to US-UK cross-border planning
If you have connections to the US and the UK you’ll need to navigate between two very different regimes. Understand the issues, avoid the traps and discover ways to plan ahead.
Moving to the UK: key considerations for US citizens
1 June 2025
News
Moving to the UK
In this article, we explore some of the key considerations for US citizens who are moving to the UK for the first time.
Managing the risk of double taxation from ‘Day One’
Upon becoming tax resident in the UK, individuals will become exposed to UK taxation in respect of their worldwide income and gains (subject to the “foreign income and gains” regime, discussed below). US persons, unlike those moving from most other jurisdictions, will also carry with them an exposure to US income tax on their worldwide income and gains. This leads to the risk of double taxation.
Benefiting from the UK’s foreign income and gains (“FIG”) regime
Although the default position is that UK residents have a worldwide exposure to UK tax on income and gains, the FIG regime offers a more generous method of taxation for qualifying new UK residents. The FIG regime is available to those in their first four tax years of UK residence, provided they have not been UK resident in the previous 10 tax years.
A US person moving to the UK in these circumstances could claim the FIG regime, which would mean that their non-UK source income and capital gains would not be subject to UK tax, even if the income and gains are brought to or used in the UK.
This could be particularly helpful for US taxpayers who commence UK residence whilst holding investments that are not tax-efficient in the UK. Although double taxation for US persons can generally be managed through use of the US-UK income tax treaty (as set out below), the dual exposure can have a significant impact on the tax-efficiency of certain types of investments – for example, where an asset is treated favourably for US purposes but is subject to higher tax rates in the UK. A common example is US mutual funds that do not have “reporting” status in the UK.1 While profits on those investments will typically be subject to capital gains rates (currently 20%) in the US, they will be subject to income tax rates (currently up to 45%) in the UK.
By claiming the FIG regime during their first four tax years of UK residence, US persons have the opportunity to ensure that their investment portfolios are ‘UK-friendly’ (e.g. by replacing any investments that have different UK tax profiles) before becoming exposed to UK tax. As there will be a US tax exposure on the disposal of any ‘non-UK-friendly’ investments, care should be taken around the timing of crystalising gains and losses. Accordingly, any investment review should not be left until the end of the FIG period, as this may not be an efficient time to make such disposals.
Welcome relief under the US-UK income tax treaty
The double taxation agreement between the US and the UK (also known as the “income tax treaty”) is designed to provide relief from double taxation. Broadly, the treaty operates by allocating taxing rights between the two countries and, to the extent that both countries have a right to tax, providing for a system of credits that allows tax paid in one country to be credited against the liability arising in the other.
The operation of the income tax treaty depends primarily on where an individual is considered to be tax resident for the purposes of the treaty. A US citizen who moves to the UK may still be “treaty resident” in the US, which would give the US the exclusive right to tax most types of income. In this case, their exposure to UK tax would be limited to certain types of UK income (such as rental income from UK property). If the individual becomes UK treaty resident, they will generally be exposed to tax at the higher of the two countries’ effective rates on a given item of income or gain. US persons moving to the UK may therefore want to retain significant ties to the US, with a view to being considered US treaty resident for as long as possible. This planning strategy can be particularly effective for those planning to stay in the UK only for a short period. However, it comes at the cost of the individual potentially being unable to use the FIG regime because if they are UK resident in a given tax year under the UK’s domestic rules this still counts towards their four-year eligibility period.
What steps should be taken ahead of time?
Determine the number of days to spend in the UK to be UK resident – The UK has a statutory residence test that is largely formulaic. For those that are internationally mobile, have business interests that straddle the Atlantic and around the world, or who spend time visiting friends and family outside the UK, it is important to know how many days they need to spend in the UK to be resident (or non-resident, as appropriate) under the UK’s domestic rules. Because residence is now the determining factor for an individual’s exposure to IHT, understanding the application of the residence rules to an individual’s circumstances is critical.
Consider risks associated with existing trusts – Any existing trusts of which the individual is a settlor, trustee and/or beneficiary should be examined before the individual becomes UK resident. For instance, it is common for US citizens who are moving to the UK for the first time to already hold assets in revocable living trusts, which they have been advised to put in place in the US as a probate avoidance vehicle. The individuals will very commonly be the trustees of those trusts themselves. Consideration ought to be given to how the trusts will be characterised for UK tax purposes, as there is a risk of tax inefficiencies resulting from a mismatch in the US and UK treatment. The double tax risks for UK resident beneficiaries of US trusts are considered in detail in our article, ‘Welcome Relief’.
Consider risks associated with existing company interests – It is common for US persons to hold assets through US Limited Liability Companies (“LLCs”), which can produce tax traps for the unwary. Again, there is a likely mismatch between the US and UK treatment of these entities, which can give rise to double taxation. Broadly, this is because the US generally treats LLCs as partnerships (i.e. transparent entities) for tax purposes, whereas the default position in the UK is that HM Revenue & Customs treat LLCs as companies (i.e. opaque entities). As a result, the US will typically tax the members of the LLC on their respective shares of the underlying profits of the LLC as they arise, whereas the UK may seek to tax distributions of profits from the LLC as dividends. This mismatch can cause treaty protection to be lost, with the result that the same income or gain suffers tax twice. The options for mitigating this risk will need to be considered.
The position regarding LLCs is considered further in our article, ‘Anson Revisited‘.
Additionally, any existing non-UK incorporated entities of which the individual is a director or key decision maker should be examined before the individual becomes UK resident. If such an entity becomes “centrally managed and controlled” in the UK (in broad terms, if the individual makes strategic business decisions in the UK), it will become subject to UK corporation tax on its worldwide income and gains. Accordingly, steps should be taken before moving to the UK to ensure that the entity remains managed and controlled outside the UK.
Consider planning opportunities before purchasing a UK home – Many US citizens who move to the UK will acquire a home there. This raises various tax, estate planning and other considerations, including mitigating exposure to UK inheritance tax and putting in place a UK will.
Contact Us
It is essential to plan in advance of a move to the UK, to take advantage of available tax reliefs and ensure arrangements are as efficient as possible. This is particularly pertinent for those with connections to the US due to their global exposure to US income tax, regardless of where they live. It is therefore important that advice is taken from advisors with an understanding of how the two legal systems interact; ideally before any action is taken. Please contact a member of our specialist US/UK team to find out more.
1To be a reporting fund, a fund must register with HMRC as such. In doing so, the managers of the fund must agree to comply with reporting obligations regarding the performance of the fund and the distributions that are made to investors. Most non-UK mutual funds will be non-reporting funds unless they have been designed with UK resident investors in mind.
Disclaimer
The members of our US/UK team are admitted to practise in England and Wales and cannot advise on foreign law. Comments made in this article relating to US tax and legal matters reflect the authors’ understanding of the US position, based on experience of advising on US-connected matters. The circumstances of each case vary, and this article should not be relied upon in place of specific legal advice.
Your guide to US-UK cross-border planning
If you have connections to the US and the UK you’ll need to navigate between two very different regimes. Understand the issues, avoid the traps and discover ways to plan ahead.
In this article, we bust some of the common myths when it comes to gifting and compare the tax implications of gifting in the US and the UK.
Myth 1: Gifts to my spouse will always pass free of tax
It is a common misconception that gifts to spouses and civil partners are completely exempt from transfer taxes in both jurisdictions. However, such gifts may be taxable where there is a mismatch in the tax status of the donor (the person making the gift) and the donee (the person receiving the gift).
UK
In the UK, there is generally an unlimited exemption from inheritance tax (“IHT”) on gifts between spouses and civil partners. However, where assets pass from a spouse who is a long term UK resident (“LTR”) to their spouse who is not an LTR, the exemption is limited to just £325,000. Gifts in excess of this will be subject to tax in the same way as gifts made to any other individual – lifetime gifts might still be free of IHT if survived by at least seven years (see Myth 4 below).
There is an option for the non-LTR recipient spouse to elect to be treated as an LTR for IHT purposes (in order to access the unlimited exemption) but this would also have the effect of bringing their non-UK assets within the scope of IHT, which may not be desirable. This will need to be considered carefully, on a case-by-case basis.
US
In the US, there is also an unlimited marital deduction from gift and estate tax on transfers to spouses in most cases. However, this will not be available where the donee spouse is not a US citizen. In that scenario, tax-free transfers in lifetime are limited to $190,000 annually (in 2025). In order to access the marital deduction from estate tax on death, assets have to be left to the non-US spouse in a special type of marital trust, known as a “QDOT”.
Myth 2: Gifts to charity will always pass free of tax
UK
In the UK, in order for a gift to charity to qualify for the charitable exemption from IHT, the recipient entity must not only be operating for ‘charitable purposes’ (as defined in UK legislation), but it must also be registered as a charity in the UK. Critically, this means that a gift to a US charity will not qualify for the exemption, no matter how worthy the charitable cause. Lifetime transfers to non-qualifying charities can trigger immediate IHT charges (as well as charges to UK capital gains tax on assets gifted in specie, as discussed below).
To obtain the exemption in both jurisdictions thought can be given to making gifts to (i) a UK “friend of” the US charity, (ii) a dual qualified structure (such as a UK charitable subsidiary of a US charitable corporate parent), or (iii) potentially through a dual-qualified donor advised fund. For example, US universities often have a UK entity through which donations can be made.
US
While the US imposes equivalent geographical limitations for income tax purposes (i.e. a charitable gift must be made to a US organisation to qualify for relief), this limit does not apply for US estate tax purposes where charitable bequests are made by US citizens and domiciliaries (provided the non-US charity is organised and operated exclusively for equivalent charitable purposes). Non-US citizens/domiciliaries, however, must leave US situs property to a US organisation to qualify for the US estate tax charitable deduction.
Myth 3: Gifts of appreciated assets will not trigger capital gains tax
US
In the US, gratuitous transfers of appreciated assets will not constitute chargeable disposals for US income tax purposes – i.e. any in-built capital gain will not be crystallised on such transfers. Instead, the donor’s base cost in the assets will be “carried over” to the donee and will be used to compute the gains realised on the eventual disposal of the assets by them.
UK
The same is not the case in the UK. With certain limited exceptions, in the UK a gift of an asset will be a chargeable disposal for capital gains tax purposes. If chargeable gains are triggered in the UK but not in the US on the same event, this can give rise to a risk of double taxation because the mismatch in treatment can result in relief being unavailable under the US-UK double tax treaty. Advice should be sought on aligning the treatment in both countries to maximise relief.
Myth 4: Gifts will always pass free of tax if I survive for seven years
UK
In the UK, outright lifetime gifts to individuals will generally be subject to the ‘potentially exempt transfer’ (“PET”) regime. This means they will pass out of the donor’s estate free of IHT if the donor survives the gift by seven years or more. If the donor survives the gift by more than three years but less than seven, the gifted sum will be subject to IHT on the donor’s death, but at a reduced rate. The PET regime can be extremely advantageous for individuals who can afford to make substantial lifetime gifts, as there are no limits on the amount that can be given away to the next generation tax free under this regime.
US
However, those who are subject to US gift and estate tax will be limited in their lifetime giving, as there is no equivalent to the PET regime in the US. Instead, US citizens and domiciliaries are broadly limited to making annual gifts to (any number of) individuals of up to $19,000 (in 2025) and otherwise eating into their lifetime exclusion amount of $13.99 million (increasing to $15m in 2026 under the Big Beautiful Bill Act). Gifts in excess of these amounts are typically subject to immediate US gift tax at a rate of 40%, which is likely to be prohibitive in most cases.
Myth 5: I can make gifts into trust up to the available US gift and estate tax lifetime exclusion amount without incurring tax
US
It is common planning for US citizens and domiciliaries to make substantial lifetime transfers of assets into trust. By doing so, they can potentially remove assets (and any future growth on those assets) from their estates for US estate tax purposes. Provided the value of the assets transferred falls within their lifetime exclusion amount for gift and estate tax, this can be done without triggering tax.
UK
By contrast, in the UK, transfers of assets into trust are immediately subject to IHT (subject to available exemptions or reliefs). IHT is charged at a rate of 20% to the extent that the value of the assets transferred exceeds the donor’s available ‘nil rate band’ of up to £325,000. This IHT charge will be reassessed at up 40% in the event that the donor dies within seven years of the transfer. For LTRs, this will be relevant to transfers of any assets, worldwide. For individuals who are not LTRs, this will apply to transfers of UK assets only. Where it is relevant, this IHT charge limits the attraction of lifetime planning using trusts.
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It is clear that gifting is an area that can cause significant difficulties for individuals with tax connections in the US and the UK. It is extremely important that advice is taken from advisors with an understanding of how the two legal systems interact; ideally before any action is taken.
Disclaimer
The members of our US/UK team are admitted to practise in England and Wales and cannot advise on foreign law. Comments made in this article relating to US tax and legal matters reflect the authors’ understanding of the US position, based on experience of advising on US connected matters. The circumstances of each case vary, and this article should not be relied upon in place of specific legal advice.
Your guide to US-UK cross-border planning
If you have connections to the US and the UK you’ll need to navigate between two very different regimes. Understand the issues, avoid the traps and discover ways to plan ahead.
