When good professional advice is taken on both the tax and legal aspects of forming a trust, they really can be a very efficient way to reduce tax in a number of scenarios.
Trusts can also provide some very important practical benefits in financial management and asset protection and can ultimately help you retain family wealth.
What is a trust?
Essentially a trust is a legal arrangement which deals with how a number of different assets, such as cash or property, is owned and managed.
A trust deed would be written up by a solicitor and then the tax obligations looked after by either yourself or an accountant.
There are three parties in a trust:
- The settlor – this is the person who is putting something into the trust, like a property they hold.
- The beneficiary – this is the person, or people, who receive the benefit of the asset that the settlor is putting into the trust.
- The trustees – these are the people who the settlor appoints the responsibility of managing the assets on behalf of the beneficiary.
How can a trust help you?
Trusts can provide both practical benefits and tax savings, for example you may use a trust as follows:
- To protect vulnerable loved ones.
- To preserve and pass down family wealth efficiently.
- As protection from care home fees.
- To minimise inheritance tax.
- To provide Income tax savings to families.
- Protection of assets in the event of divorce or remarriage.
- To streamline later life planning and avoid lengthy probate.
What we offer
Trust Registration
The majority of UK and non-UK trusts arrangements now require registration with HMRC.
As of 1 September 2022, it became a requirement for many existing trusts to register, and all new trusts formed after this date should be registered within 90 days.
We can assist with the trust registration process from start to finish, and our fees start at £250 + VAT for registrations.
Annual Compliance and Taxation
For taxable trusts in receipt of income – such as rental income, interest, dividends etc – self assessment tax returns must be filed and the applicable trust tax paid over to HMRC by 31st January following the end of the tax year.
Any payments to beneficiaries must be reported on a form R185.
Discretionary trusts with assets worth over the nil rate band (currently £325,000) are liable to an inheritance tax charge of up to 6% every 10 years.
This must be reported and paid to HMRC within 6 months on a Form IHT100.
Any capital distributions to beneficiaries – for example a beneficiary becoming absolutely entitled to a property – can trigger an inheritance tax exit charge and is also reportable on a form IHT100.
We can assist in all aspects of annual trust tax compliance, and our fees start at £1,000 + VAT for annual trust tax returns and £500 + VAT for IHT100 forms.
Bespoke Trust Tax Advice
Our team is knowledgeable in all aspects of trust taxation, administration, and inheritance tax and we are able to provide advice on a range of area to do with trusts:
- Offshore trusts for non-domiciled individuals.
- Trust 10 year ‘principal’ charges.
- Advising on exit charges when winding up trust arrangements.
- Capital gains tax when distributing assets out of trust.
- Inheritance tax planning using trusts
- Trusts for vulnerable beneficiaries, including disabled persons trusts and bereaved minor trusts.
- Trust registration requirements
Getting in touch
We know that everyone’s circumstances are unique, and we pride ourselves in providing a truly bespoke and personal service to each and every one of our clients.
If you’d like to discuss our trust services, then please contact Christie Inns or Jan Friend.
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