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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.