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The Taxation of Trusts: A Review

  • January 14, 2019
  • By James Mabey, Senior Associate

The Taxation of Trusts: A Review

HM Revenue & Customs launches a new consultation

Following the Office of Tax Simplification’s recent review of inheritance tax (see article here), HM Revenue & Customs (‘HMRC’) has launched a consultation in line with the government’s commitment at Autumn Budget 2017 to make the taxation of trusts simpler, fairer and more transparent.

The consultation is intended to set out the government’s principles for taxing trusts and seek views on those principles, and also to seek views and evidence on the case for and against reforms to address any areas of trust taxation which do not currently align with those principles. HMRC also intend to use the opportunity to address any remaining opportunities to use trusts, in particular non-resident trusts, for tax avoidance or evasion and to close remaining loopholes within tax avoidance schemes.

HMRC would welcome views on the nil rate band, trust charges and will trusts (all regarding inheritance tax), private residence relief (regarding capital gains tax), trust management expenses (regarding income tax), income and capital receipts in trust law, and trusts and transactions declared void by the courts.

In addition, HMRC would like views and evidence on excessive complexity in the trust taxation system, in particular regarding vulnerable beneficiary trusts, and on all other complex administrative aspects of the system.  HMRC also acknowledges that there is already significant activity underway in relation to trust transparency, notably the Common Reporting Standard and the Trusts Registration Service, but has requested views and evidence on whether there are other measures it could take to enhance transparency still further.

The closing date for comments is 30th January 2019.

For more information, please contact the partner having responsibility for your affairs or any partner in the private client department here.

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