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Personal Services

TRUSTS

Despite the imposition of higher levels of taxation in recent years, Trusts still remain tax efficient vehicles for effecting the passing of assets to future generations.

They also maintain their main purpose of enabling the underlying income and capital value of the settled assets to be protected where children are too young to handle capital properly or if there are concerns about the children’s spouses or partners.

The 2006 budget has , however, introduced the most significant change to the taxation of trusts since the introduction of Inheritance Tax. The new tax regime is included in the Finance Bill 2006, which is anticipated to become an Act in July 2006, despite widespread protests. The Principal Effects for trusts are as follows:

New Trusts

New trusts will be subject to the same tax rules as any existing discretionary trust:

An immediate charge to the IHT will arise if a gift is made to a trust after 22 March 2006. Tax will be payable on the amount by which the gift (plus any prior chargeable transfers) exceeds the Nil Rate Band (currently £285,000).
The new trust will be subject to an IHT charge every 10 Years, with tax payable at a maximum of 6% of the value of the trust in excess of the Nil Rate Band.
Where property is taken out of the trust, an IHT "exit" charge may apply.

Exceptions

Life interest trusts created by will or an intestacy are exempt subject to certain conditions.
New trusts for minors created by will are only exempt if at least one of the child's parents is dead and the trust is created by the will of a deceased parent.
New discretionary trusts for the disabled will not be affected by the new regime.

Existing Trusts

Existing life interest trusts will not be affected unless the life interest comes to an end and the trust continues.
An existing accumulation and maintenance trust will become subject to the new tax regime on 6 April 2008 unless the terms of the trust are altered so as to provide the capital to vest at the age of 18.

The Issues

Do you need advice in creating a Trust?
Do you require a positive informed approach to your current Trust Tax strategy?
Do you require advice on the winding-up of a Trust?
Are you in need of someone to deal with either the day to day administration of the Trust and/or preparation of annual Accounts and Trust Returns?

We can offer expertise and assistance in all of the above areas, with a view to recognising tax saving opportunities and taking away the burden of complying with all of the associated accounting, reporting and tax issues.

The wording of Trust Deeds has a major bearing on the tax treatment of a Trust. ‘Getting it Right’ at the outset can save heartache and considerable sums of tax. We can offer advice on the implications of your proposed Trust strategy. We can also offer ongoing advice to mitigate the effect of Income Tax, Capital Gains Tax and Inheritance Tax. Where a Trust is an integral part of a family’s overall business and personal tax strategy, we have the overall capacity to link all of these areas and arrive at an optimum tax saving plan. Furthermore the Trustee Act 2000 has underlined the Trustees responsibility to have an effective investment policy. Our Financial Services Division can offer professional investment advice, thus enabling the Trustees to meet their obligations:
If you are already a settlor, trustee or beneficiary of a trust, or you think a trust may be of help in your overall financial plan, contact wts@muras.co.uk
Please select any other area you are interested in from the list below.
Tax Planning
Accounts
Estate Planning and Life Care
Trusts


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