Address remaining opportunities for trusts, in particular non-resident trusts, to avoid or evade tax. The Common Reporting Standard and Trust Registration Service have already had a significant impact on the transparency of trusts are also helping to tackle tax avoidance and evasion. Currently only trusts that have a tax consequence are required to register with the Trust Registration Service, but a new money laundering directive is expected to come into force in early 2020, and this will require all trusts, whether or not there are tax consequences, to be registered. Along with these changes, HMRC will also be looking at reasons why an offshore trust may be used rather than a UK trust and if there are any tax loopholes that can be closed when using an offshore trust to potentially avoid tax.
To ensure trust taxation does not result in unfair outcomes or other unintended consequences. The government believes that the trust tax regime is broadly neutral once account is taken of the nature of a trust and who benefits from it, but it is looking at the following:
The IHT nil rate band usage when setting up a trust
Trust IHT charges and that trusts can charged significantly lower IHT than the 40% paid by the Estate at death
Will trusts and comparing them with trusts set up in the settlor’s lifetime
To help make the use of trusts straightforward – The government is specifically committed to simplifying the treatment of vulnerable beneficiary trusts, but will also be exploring the simplification of trust taxation overall
The consultation period is now closed. We await the results and any changes it may bring.
