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25th December 2013

Changes to Inheritance Tax for Trusts following Chancellors Autumn Statement

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Following the Chancellors Autumn Statement, HMRC have published draft legislation amending the Inheritance Tax treatment of Trusts.

10 year anniversary charges

With effect from 6 April 2014 trust income that has not been distributed within 5 years will be included within the trust’s capital value when calculating the IHT liability on 10 year anniversaries. This is an improvement on HMRC’s original proposal of a two year period.

Filing IHT returns

Again with effect from 6 April 2014, the date for filing IHT returns and paying the tax due will be aligned at 6 months after the end of the month in which the chargeable event occurred. Currently the payment of the tax varies from 6 to 12 months, but the period for filing the return is12 months after end of the month of the chargeable event.

Other HMRC proposals

HMRC has proposed allocating the nil rate band, currently £325,000, between all trusts created by the same Settlor. At present, each trust has its own nil rate band. This proposal is still under consideration by HMRC.

Likewise HMRC have proposed a standard rate of tax for ten year anniversary charges, where currently there is an involved calculation with a maximum charge of 6%. For more information, please contact Eric Wardle, Head of Trust Management on 01604 233233 or click here to email Eric. To learn more about our Trust service, click here.

Eric Wardle
Eric Wardle

Chartered Accountant

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