Recent information released by HM Revenue and Customs, shows that the number of Trusts in the UK has declined for the 5th year in a row, as the Tax Planning Vehicles fall out of favour with families.
The latest statistics from HM and Revenue showed 151,000 Trusts submitted a tax return in 2018/19 tax year – down from 154,500 the previous year. However, despite the fall in total numbers, the amount of tax by the vehicles obtained by HM Revenue and Customs was a whopping 1.43 billion pounds – a 7% increase on 2017/18 figures.
Trusts have been used for centuries to safe-guard family assets. But a series of regulatory changes have dented their appeal, particularly as a Tax Planning Vehicle.
The recent decline in the number of Trusts in the UK, shows just how challenging the Regularity and Tax Landscape has become over the past two decades. Despite this, the amount of tax generated by assets held in Trusts, represents a sizeable boom for the Treasury each year.
Advisors attributed the increase in Tax to the relatively strong performance of common assets held in Trusts, such as shares and UK property.
Trusts have been in decline steadily since 2006, when the then Chancellor, Gordon Brown announced reforms to stop Trusts ‘being used to shelter wealth from Inheritance Tax’.
The reforms meant that most assets moved into Trusts, after this date became subject to an immediate 20% inheritance tax charge, and an additional charge of 6% every 10 years. A further charge of up to 6% is levied when assets are transferred out of the trust.
Trusts also declined in popularity after policy changes in 2017, required them to be listed on a public register.
However, there are still many grounds and situations where it is appropriate for a Trust or separate Trusts to be considered in respect of Tax Planning.
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