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Inland Revenue Publishes Consultation Paper On Trust Modernisation

by Robert Lee, Tax-News.com, London

17 August 2004

The UK’s Inland Revenue on Friday published a consultation document on modernising the tax system for trusts which sets out more details about the changes to the taxation of trusts announced by the Government in the 2004 Budget.

In 2003 the Government asked the Inland Revenue to consult trust professionals, representative bodies and other interested parties on ideas and options for modernising the income tax and capital gains tax (CGT) system for UK-resident trusts.

The response was such that the Government has decided to take certain key measures forward. At the 2004 Budget, it was announced that, with effect from April 2005, there would be:

  • a new tax regime for trusts for the most vulnerable (backdated to 6 April 2004)
  • a £500 basic rate band applying to the income of all trusts otherwise chargeable at the rate applicable to trusts (RAT), and
  • harmonised trust definitions and tests for income tax and CGT purposes.
With its overhaul of UK trusts the government is hoping to achieve a system 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.

The consultation period began on 13 August and will run until 5 November 2004.

The Inland Revenue consultation on modernising the tax system for trusts can be found in the Tax News Resources section.

 

 






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