Summer Newsletter - …more tax on trusts
By the Finance Act 2006 the Government made sweeping changes to the way in which some trusts are taxed. Many of you have set up accumulation and maintenance trusts either during your lifetimes or to take effect after you die, under the terms of your Wills. The recent changes will have an effect on accumulation and maintenance trusts.
Inheritance tax returns will now be required in respect of them every ten years or when capital payments are made out of the fund when changes to Inheritance Tax may occur. These charges are known as the ‘ten year or proportionate charge’ and the ‘exit charge’.
This means there is an additional inheritance tax liability and a great deal of additional administrative work to calculate the tax and complete returns. Often, the inheritance tax liability will be very small but the costs incurred preparing the Revenue return disproportionately high. Such costs will be unavoidable as the Trustees have a duty to comply with the legislation.
As a Trustee you have powers to change the original settlement and there is a small window of opportunity to make the change. Trustees have until April 2008 to review the documents and decide whether or not to make any changes, if such changes are allowed within the original trust deed.
Do not miss the deadline. Contact Kathryn Tarry on 0118 9842266 now if you think you may be affected and see what you can do to save costs.