Following April’s Budget, the Government launched an industry consultation on plans to prevent people avoiding inheritance tax by establishing multiple trusts on different days, all with their own individual nil rate bands below the £325,000 IHT limit.
The Government was concerned with the popularity of the strategy which can provide potentially significant tax savings.
While the Government said it still plans to target this activity its said it will “introduce new rules to target avoidance through the use of multiple trusts” in the Finance Bill 2015, details of which are not yet available.
It added it will also look to simplify the calculation of trust rules.
"Period of uncertainty"
According to Old Mutual Wealth head of technical marketing, Rachael Griffin, before today, any trusts set up prior to 6 June 2014 would not have been impacted by the rule change unless they added new property to the trust.
“This appears to be a U-turn on the Government’s previous position,” said Griffin. “This is potentially good news in terms of removing the administration burden for the settlors of trusts, but advisers face a period of uncertainty regarding what they should do with existing trusts.”
This view was echoed by Brendan Harper, technical manager at Friends Provident International, who said while the decision to drop the single settlement nil rate band was welcome “it remains to be seen how the Government intends to deal with the taxation of multiple trusts created by the same settlor”.
