UK Law and Practice Contributed by: Roger Gherson, Alfred Gherson, Lisa Uttley and David Tipping, Gherson Solicitors
This power is constrained by standard investment criteria: • trustees must consider the suitability of each investment to the trust and the need for diversifica - tion; • these criteria cannot be excluded by the trust deed; • requires ongoing review of investments; • requires trustees to obtain and consider proper advice before investing; • provides a statutory duty of care to investment decisions, with a higher standard for professional trustees; • the equitable duty requires trustees to invest for the best financial return for beneficiaries, subordi - nating personal ethical or political views; and • trustees may delegate investment management to professional agents with liability limited to compli - ance, with the duty of care in appointment and review. 6.4 Fiduciary Investment The investment standard applied to fiduciaries in England and Wales has evolved from a restrictive, asset-by-asset “prudent man of business” test into a modern framework that expressly aligns with portfolio theory. The Trustee Act 2000 provides the current statutory regime, conferring broad default investment powers subject to structured duties of suitability, diversifica - tion, advice and care. Trusts are permitted to hold active businesses, but doing so imposes significant additional obligations on trustees. The following sets out the investment theory, its rela - tionship to modern portfolio theory, the diversification requirement and the rules governing the ownership of active businesses by trusts. Diversification is required by section 4 of the Trustee Act 2000, but only “so far as is appropriate to the circumstances of the trust” — allowing concentrated positions where the trust’s purpose demands it (eg, a family business), provided trustees document their reasoning.
Trustees must also consider suitability, obtain proper advice and apply the statutory duty of care. Trusts may hold active businesses, typically through a controlling shareholding. Where they do, the duty established in Bartlett v Barclays Bank Trust Co Ltd [1980] Ch 515 (the “Bartlett duty”) requires trustees to actively supervise the company and intervene if direc - tors take excessive risks. Anti-Bartlett clauses can modify this duty but cannot exclude liability for dishonesty. Trustees carrying on a business directly (not through a company) are per - sonally liable for business debts, making corporate structuring essential. 7. Citizenship and Residency 7.1 Requirements for Domicile, Residency and Citizenship Domicile is a common law concept and is distinct from immigration status or nationality. UK tax residence is determined by the Statutory Residence Test (SRT), which applies a series of automatic and sufficient ties tests based on days spent in the UK and connections to the UK. To maintain most types of immigration per - mission and to qualify for Indefinite Leave to Remain (ILR), an individual generally needs to reside in the UK for at least six months per year. If the ultimate goal is British citizenship through naturalisation, the resi - dence requirement increases to nine months per year. Tax Residence – Statutory Residence Test The SRT applies a series of automatic tests that deter - mine whether a person is resident or non-resident for a tax year. A person will not be resident in the UK if they meet any of the following tests: • they spend fewer than 16 days in the UK in that tax year; • they spend fewer than 46 days in the UK in that tax year and have not been resident in the UK in any of the preceding three tax years; and • they work full-time overseas.
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