At first glance, you would be forgiven for thinking there were no announcements that could impact on trustees. There was reference to the announcement in the Autumn Budget 2017, that the Government will publish a consultation on the taxation of trusts. It is suggested that the purpose of this consultation is to make the taxation of trusts simpler, fairer and more transparent.
There is no guidance as to when we can expect this. We will have to await the detail and hope that simplification does not lead to significant tax increases for trustees. The use of trusts as an effective tool for passing down assets to the next generation, not necessarily gaining a tax advantage, has, after all, been severely curtailed in recent years.
There were however two announcements which could affect trustees: Capital Gains Tax (CGT) realised on property sales and entrepreneurs’ relief.
Trustees owning residential property will need to be mindful of the introduction of a payment on account regime for CGT realised on such properties. Rather than simply paying through the trustees self-assessment return for the year of sale, those trustees with a chargeable gain arising on sale of property will now need to file a return and pay the tax within 30 days of completion. While this change will not affect the requirement of the trustees to keep full and accurate records of the purchase, it will mean the information is required far earlier than is currently the case. Where the property has been held for many years, it may also be necessary to consider obtaining a March 1982 value at the time the property is placed on the market to avoid paying too much tax at the outset.
Another thing for trustees to look out for is the consultation announced on the reform of the private residence relief rules.
Finally, trustees are able to take of advantage of Entrepreneurs’ Relief where they hold shares in a qualifying beneficiary’s personal trading company or where assets are used in a qualifying beneficiary’s business. Trustees will therefore need to be aware of the increased holding period and the changes to what qualifies as a ‘personal company’.
There are currently no game changers for trustees that may encourage them to consider the ongoing viability and purpose of atrust. This may however come as a result of the proposed consultation.
By necessity, this briefing can only provide a short overview and it is essential to seek professional advice before applying the contents of this article. No responsibility can be taken for any loss arising from action taken or refrained from on the basis of this publication. Details correct at time of publication.