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CIOT And ICAEW Publish Joint Submission On Modernising Trusts Taxation

by Robin Pilgrim, LawAndTax-News.com, London

22 October 2004

The UK's Chartered Institute Of Taxation (CIOT) and the Institute of Chartered Accountants in England and Wales' (ICAEW) Tax Faculty announced on Wednesday that they have issued a joint preliminary submission to the Inland Revenue's consultation on the modernisation of the tax regime for trusts, which was launched on 13 August 2004.

In the submission, the two accounting industry bodies announced that:

"We are glad to note that the Government recognises the importance of the role trusts can play in society. As far as possible, we would support its desire for a tax system for trusts that does not provide artificial incentives to set up a trust, but equally avoids artificial obstacles to using trusts where they would bring significant non-tax benefits."

"We note that the Government does not want a system that enables people to use trusts to avoid tax; equally, as far as possible, it does not want the tax system to penalise beneficiaries where a trust is imposed upon them by statute, such as the laws of intestacy. Nor does it want to penalise beneficiaries where a trust exists to protect the most vulnerable such as disabled persons."

However, they went on to add that:

"This is narrower than avoiding artificial obstacles to using trusts. Surely the tax system should not penalise beneficiaries wherever a trust is employed, whatever their status? This does not necessarily mean that the rules should always be the same. Nevertheless, the principle should be that a beneficiary should be no worse off where a trust is involved than if he had received the income or made the gain personally."

"We believe there are areas where the proposed changes fail to achieve this neutrality. Today's taxpayers do not expect to achieve a tax benefit from the use of trusts but we do not see any justification for a penalty. Beneficiaries who are not settlors have trusts imposed upon them and do not themselves set up a trust in order to try to achieve a tax benefit."

The full text of the CIOT-ICAEW joint submission on modernising the tax system for trusts can be found in the Tax-News Resources section.

 

 






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