Next Government urged to leave Trusts alone
Published April 2010
Not all Trusts are tax planning vehicles used by the super rich to avoid paying tax as some would have us believe, according to tax experts at MFG Solicitors.
Great care is now needed to negotiate the tax minefield surrounding trusts, but all is not lost and with the appropriate expert advice the legislative effects can be minimised.
Tax and trust manager Steven Holden said: “Trusts have been heavily bombarded by the Government in recent years in successive Budgets in 2006 and 2007, and on top of those new sets of regulations we are now seeing the 50 per cent income tax rate being levied against trusts too.
“Trusts are used by normal people for legitimate life planning reasons and are not all tax planning vehicles for the super rich as the Government would have us believe.”
He said that measures intended to stop the super rich from putting money and assets into trust to avoid paying taxes had inadvertently caught up some 95 per cent of the population who simply wanted to set down clearly what their intentions were when they died.
“Very commonly, we see trusts used to protect property, particularly in the case of a second marriage, where the deceased wants the husband or wife to be able to continue to live in the house while they are alive, but then wants to ensure that the property passes to their own children rather than those of their spouse.
“Sometimes trusts are used when people have suffered personal injury and the Court has put an award into trust because the individual may no longer be able to handle their own affairs.
“In some cases, grandparents want to leave specific amounts to grandchildren. In 2006, the Government stopped parents doing this for their children, even if the intention was simply to provide funds for their university education or a wedding, or for a deposit on their first house.
“Then the Government introduced a six per cent tax inheritance tax charge on trusts every ten years, and now they have said they will be levying the 50 per cent income tax rate.”
He said that for the vast majority of the population, trusts were a vehicle to protect relatively small amounts of money or property for particular purposes – not a vehicle to enable the super rich to avoid paying tax altogether.
“Unfortunately a one size fits all approach has swept up everyone into what were intended to be tax avoidance rules aimed at the top fiver per cent of earners,” he said.
“It is vitally important to take the right professional advice when using Trusts to make your intentions clear and to protect your money and assets for those you want to benefit.”
