Trusts remain a popular vehicle for tax and succession planning. Set up appropriately, they can continue to form an effective part of estate planning. However, this is a highly complex area of UK tax law and expert advice is of paramount importance. Trusts and Inheritance Tax should be considered together.
A trust for English purposes is effectively a structure comprising three parties:
- The settlor, being the person who contributes assets to the trust. This could be cash, shares, property etc. There can be more than one settlor.
- The trustees. These are the people (either individuals, a professional corporate trustee, or a combination) who take legal ownership of the assets contributed by the settlor. In family situations, members of the family (including the settlor) are often the trustees; in more complex situations, a professional trustee may take on the sole trustee role.
- The beneficiaries, being the people who can benefit from the trust’s assets and income. The beneficiaries can be named specifically (e.g. “John Smith and Jane Doe”) or can be as a ‘class’ of beneficiaries (e.g. “the children and grandchildren of John Smith”). Charities can also be beneficiaries.
Trusts and Inheritance Tax (Trusts and IHT)
A raft of changes to the taxation of trusts over the years means the landscape is now as complex as it has ever been. Nonetheless, Trusts can still be an efficient tool for private clients, in the right circumstances. They should always be considered as part of an individual’s wider affairs; the expert team at Pure Tax has extensive experience in this area of trusts and IHT.
More widely, it is important to give due consideration to IHT to ensure your affairs are as streamlined as possible. Not only does poor estate planning risk wiping out 40% of your family’s inheritance, the administrative and emotional burden of dealing with assets not appropriately structured can be exhausting.
We realise that IHT and planning your estate can be a sensitive topic. Pure Tax approach these discussions in a delicate, discreet and professional manner, taking the time to understand our clients’ circumstances in detail. Our wide range of services includes advising on the following:
Estate reviews and a ‘Wealth Health Check’ to understand your current position, your aims and your key areas of concern;
Business Relief in relation to business interests, shares and certain investments, which can provide relief of up to 100% from IHT;
Trusts and IHT as a vehicle for passing wealth to the next generation of your family in a tax-efficient way;
Structuring assets both in a tax-efficient manner, and in such a way as to minimise the administrative burden for beneficiaries of estates;
Reviewing existing Trust structures to establish if they remain fit for purpose, and advising on restructuring where appropriate.
Please also see our standalone PDF guide to Trusts more generally.
Non-UK Resident Trusts
Trustees of non-UK trusts have very specific considerations that require the input of advisors well-versed in the inherent complexities.
The compliance and administrative burden for non-UK trustees has never been greater. Remaining up to date with the extensive changes introduced in April 2017 and later is vital. The team at Pure Tax are experts in this field and can advise on the full remit of trust taxation, including:
IHT implications of holding UK residential property, with changes introduced from 6 April 2017 bringing property interests held indirectly (i.e. through a company or similar) within the scope of the IHT ‘relevant property’ regime;
Reviewing trust structures in light of the Requirement to Correct legislation, and assisting with bringing trustees’ UK tax affairs up to date – via disclosure – if required;
Changes to the taxation of trusts settled by non-UK domiciled individuals, and the impact for trustees, settlors and beneficiaries;
Establishing and managing new structures, including working with a regulated trust services provider, where appropriate, to provide a full-capability fiduciary service.
Please also see our standalone PDF guide to Offshore Trusts more generally.
HOW CAN PURE TAX HELP?
At Pure Tax our Tax Investigation & Disclosure specialists are industry recognised and have dealt with hundreds of contentious situations with HMRC over the years. We are adept at managing interactions with the tax authorities to ensure that the investigation and disclosure processes run smoothly and that your interests are best protected.
