Measures to ‘simplify’ trust charges delayed

  • February 02, 2014
  • By Hunters Law

HMRC’s proposals to ‘simplify’ the calculation of inheritance tax charges on ‘relevant property’ (e.g. discretionary) trusts have been put on hold until at least 2015.

The proposals, which included the introduction of a flat rate of 6% on ten-year anniversary and exit charges, and the division of the nil rate band between all relevant property trusts made by the same settlor, met with strong opposition from private client trust practitioners.

The general view was that the proposals were unfair in their retrospective application to existing trusts, and that the measures would merely swap one onerous regime for another rather than provide much coveted simplicity.  A further concern was that any purported simplicity would come at the expense of higher tax charges.

HMRC have accepted these comments for the time being, but remain committed to simplifying the charges.  They will look at this again with a view to including legislation in the Finance Bill 2015.  However, it remains to be seen if HMRC will pursue their proposals for a flat rate of tax and for a division of the nil rate band.

As any changes could have a profound effect on the taxation of relevant property trusts, trustees are advised to ‘watch this space’.

If you would like more detailed advice on the taxation and administration of trusts, please contact the partner at Hunters having responsibility for your legal matters, or (for new enquiries) please contact a member of our Private Client team.

This article is based on the law as at 2nd February 2014.  Although we endeavour to ensure that the content is accurate and up to date as at that date, it is designed to provide general guidance only and is not intended to be comprehensive or to constitute professional advice.  Specific advice should always be sought, and you should only rely on advice which is given, by reference to particular facts and circumstances.

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