Personal Law

This is a summary of HMRC’s update on tax, trusts and estates .

Income tax

Where trusts and estates receive gross income from savings and the tax liability is below £100, they have not had to submit tax returns. That allowance is being extended to include the 2019/20 to 2020/21 tax years. This will save on administration costs.

Estates which are deemed to be “complex” under HMRC criteria have to submit tax returns annually. This has to be registered for online. The process for this has caused issues, with HMRC correspondence being incorrectly addressed, so HMRC seek improvements to the input of data to them.

Those estates which are not complex can still be dealt with informally by a one-off submission to HMRC when the estate has been wound up. Executors should make sure they know whether they are in the complex regime or not so they do not miss tax returns.

Inheritance tax

The Office of Tax Simplification has recommended changes to inheritance tax, which will impact upon the taxation of the transfer of wealth. We have blogged on this before.

The message to come from this is to seize the (estate planning) day now and work with the reliefs we have available, rather than taking a wait and see approach to suggested changes. We are running a seminar on this.

Trusts and compliance

Trusts have to register the personal details of the person who funded the trust, and of the trustees and the beneficiaries, with HMRC. This came out of EU cooperation on tax transparency. The UK has sought to gold plate these regulations and therefore tax transparency is not likely to disappear after Brexit.

In anticipation of the UK’s obligation to implement the Fifth Anti-Money Laundering Directive which will widen access to the register, HMRC has set out the process by which trusts can ensure only those with a legitimate reason – usually a trustee, or their solicitor or accountant – can access and update details. This may be good news for those who wish to preserve the privacy provided by family trusts. In order to preserve privacy in any event, the drafting of a trust deed requires to be done carefully and the inclusion of individuals named in the trust requires bespoke advice. These are surmountable challenges and trusts remain a preferred vehicle for many families holding and passing on wealth.

Leigh Gould

Partner at Brodies LLP
Leigh advises Personal clients on succession planning, being the passing on and protection of assets, in the most tax efficient way. This includes wills, trusts, executries and powers of attorney, but Leigh also advises on using additional structures for holding and passing on wealth and minimising tax, such as charities, partnerships and family investment companies. She has a particular focus on advising clients with land and rural businesses and also on contentious trust and executry issues.
Leigh Gould

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