Trust Information Update - 2006

• Act now to avoid trust tax
• Archived News Items 2005
• Budget 2006
• Gordon Brown and Inheritance Tax
• Inheritance tax risk will hit 4.2m households by 2020 says Halifax
• New inheritance tax blow
• Stats show 2/3 people still have no Will
• Trust Information Update
• Will Clinics

As you have probably seen by now in the media the Inland Revenue (HMRC) are attempting to implement changes to the taxation of UK resident trusts. On 31st January 2006 HMRC published draft clauses to be included in the Finance Act 2006.

The new rules announced as part of the Budget will apply to trusts made on or after 22nd March 2006 and subject to events in relation to existing trusts. Please note that the trust written into your will does not come into effect until first death has occurred.

The changes proposed are that all trusts created on or after 22nd March 2006 will be taxed as discretionary trusts with the consequent lifetime charge to IHT of 20% on assets transferred into the trust (above the nil-rate band) and the ten year anniversary and exit charges will then apply.  There is a limited exception for trusts made in favour of a disabled person.  Please note that the nil-rate band threshold currently stands at £285,000 per individual. This is the amount every individual is allowed to give tax-free.

For our clients we write an IOU Discretionary Trust into your Wills. This trust has not been mentioned for change by HMRC. The trusts that are currently undergoing modernisation are the Accumulation & Maintenance trusts (for children), Interest in Possession Trusts and some trusts for the disabled. 

Due to the current lobbying by various organisations and committees it is still unclear whether the Government will go ahead with their proposed changes.  The Finance Bill is hoping to be published by July 2006 and this publication will make this area much clearer and I will certainly be in a much better position to notify you if any of the proposals affect your particular circumstances / situation.

If you feel that any of the issues raised above concern you please contact one of our Specialists.