HMRCs consultation on new trust charges

In June HMRC have put out to consultation various changes which they suggest will help to "simplify and make fairer" the calculation of trust charges. This includes entry, exit and 10 year charges including how the nil rate band is included in these calculations. This is the most recent of a number of consultation documents issued.

The current  tax planning  that HMRC are particularly aiming to change is the ability to establish a number of trusts, each of which should get the benefit of a full nil-rate band when it came to, for example, calculating the  ten-yearly charge. Current planning involving the creation of multiple settlements, and also planning whereby a settlor creates a new settlement every seven years, appear not to be to HMRC's liking, so in future it appears likely that each settlor will only get the benefit of one 'nil-rate band' to apportion between however many settlements they choose to establish

HMRC are proposing that:

*   Each Settlor will have a "Settlement" nil rate band ("SNRB"). This will be separate from and unconnected with their own personal nil rate band. The Settlor can decide how their SNRB is allocated between Settlements they created. This is not as favourable to the current situation where each trust has its own nil rate band.

*   The SNRB will be in-line with the current nil rate band amount.

*   The proposed legislation  will have effect for calculations from 6 April 2015 but will only apply to new settlements created after 6 June 2014 (including additions to existing settlements after this date). This at least is beneficial as it confirms that HMRC will not impose the new rules retrospectively to existing trusts which had been feared.

The precise outcome of the proposals is not certain although the direction of travel seems clear. Further information will be available in the Autumn when the responses to the consultation document will be published.  Watch this space