Foundations and UK tax

The use of foundations has gained in popularity over the past few years, given its unique characteristics. In essence it is a special form of trust, however, this simplification does not do it justice. The Panama Foundation is a type of entity that is a cross between a trust and a corporation. A Foundation is an entity that is different from any other legal entity because it is not the legal personification of a group of people (as with a company), instead it is a legal entity that doesn'tt have owners (share-holders, members, or partners). Liechtenstein was the first jurisdiction to introduce legislation to allow these foundations. The problem with a Liechtenstein foundation is the cost. Unless you have assets over £500,000 to transfer, it's unlikely to be cost effective. The Panamanian foundation has grown in recent years due to the beneficial tax regime, very strict privacy/confidentiality laws and the low cost of set up. As with the Liechtenstein foundation the assets of the Panama foundation take on a separate legal identity from the personal assets of the participants of the foundation (these can include the Founder, Protector and Beneficiaries.) Foundations are useful because they offer a separate legal personality. Therefore when applying for an offshore bank account, it is often necessary to state the beneficial owners. If a foundation is used - it is the foundation itself that is the beneficial owner. For UK tax purposes a Foundation is now treated as more like a company than a trust and therefore the anti avoidance rules that apply to companies as well as the transfer of assets abroad provisions will apply.