Change on Trust Rules… Not Yet!

In October 7, 2014
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We have received a number of calls in the last month regarding the proposed changes to the rules that affect Trusts. These calls were mostly a result of erroneous reports in the press about changes in Trust legislation. For those of you who may have missed the reports, this will bring you up to date.

Last year, HMRC proposed a change to the rules to allegedly “simplify” how Trusts are taxed. The proposed changes would not affect Income Tax or Capital Gains Tax, but would affect the “Periodic Charge” which is a nominal charge applied to Trusts every 10 years. This is 0.60% per annum on any balance in each Trust, currently above £325,000.

The changes also includes a proposal that instead of each Trust you create in your lifetime having a £325,000 allowance before a liability against which the Periodic Charge is claimed, a Testator (someone who creates a Trust) would have only one £325,000 allowance that would be spread amongst all the Trusts they create. This would result in additional Tax being collected by HMRC from Trusts.

As is often the case, HMRC do not give due consideration to the ramifications of their proposals. In turn this often results in additional problems that they had never even considered. The proposals received so much criticism, HMRC’s decision was deferred to August 2014, but now they are deferring their decision once more, probably until December 2014.

Should We Wait and See or Act Now?

Wait? Sitting tight and waiting to see what happens is one option, but not one that we would recommend. You could be waiting a very long time as they consistently deliver decisions which they then change at a later date or put off until further consultation. You are therefore taking the risk that future changes will not be beneficial to you and your planning.

Act Now! Our view is that the best time to act is sooner rather than later. If we take action now, some will say you run the risk that they will change the rules and this will affect your plans already in place. In reality, HMRC and the Government knows there is no way they could sensibly and legitimately put into place retrospective legislation, as it would most likely be un-workable in practice. Even if they did implement retrospective legislation, it still would not change the really important protection and benefits offered by the use of Trusts in effective family wealth preservation. Unfortunately, none of us know how long we have left, so in our opinion it is better to not delay and put your planning in place now.

If you would like to discuss this or any other area of planning please contact us on 01489 877547 to book a FREE Initial Consultation.


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Jasmine has been a qualified Financial Planner since 2008. She has also been a member of the Society of Will Writers since 2012. She is passionate about helping Clients build their wealth and achieve the financial lifestyle they desire. Her areas of expertise are that of Savings, Investments, Pensions and Retirement Planning.

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The Financial Conduct Authority do not regulate, Will Writing, Buy to Let Mortgages, Auto-Enrolment, Tax Advice and Estate Planning. Your capital is at risk. Investments can fluctuate in value and investors may not get the amount back they invest. The guidance and/or advice contained within the website is subject to the UK regulatory regime and is therefore primarily targeted at customers in the UK.

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Redwood Financial Family Wealth and Estate Planners Ltd Company Number: 08926661
Registered Office Address: Wellesley House, 204 London Road, Waterlooville, Hampshire,