Old Mutual Wealth financial planning expert Rachael Griffin admits that “it is hard to predict exactly what this will cover”.
“It may be connected to the government’s continued determination to close down tax avoidance. There is a clear distinction between legitimate vanilla offshore trusts and the aggressive complex offshore corporate schemes,” she added.
“I hope the government makes this distinction and doesn’t use a sledgehammer to crack a nut.”
Not likely to be simple
“Given that we have spent the last three years waiting for the government to legislate on the impact of the non-dom changes on trust tax rules, there is a certain amount of uncertainty as to what this consultation is proposed to cover”, said Mark Davies, managing director of tax advisory firm Mark Davies & Associates.
“If this can be taken as an example, it is unlikely that the government will be able to propose changes that can be classified as simple.”
Kay Mind, director of private client and trusts at Kreston Reeves, concurs: “With regard to making the taxation of trusts simpler, history has shown us that governments’ attempts at simplifying our tax system often results in a system that is anything but simple.
“When the government talks about the taxation of trusts being fairer: fairer for who? The trustees, settlor, beneficiaries or Joe Public?”
The taxation of trusts is already being address through the introduction of the Trust Register, “where all taxable trustees must provide detailed information on the trustees, settlor, beneficiaries and settle assets”, she added.
“This new obligation leaves no hiding place for individuals involved in legitimate family trusts created for purposes other than tax. Although the register is not open to the public, it can be accessed by various law enforcement agencies.
“Trusts cannot be more transparent!”
Passing on wealth
For Prudential’s head of technical, Les Cameron, trusts are less about tax efficiency and more about “controlling the passing on of your wealth”.
Therefore, the changes, whether good or bad, should “not detract from trusts planning”.
“The government has looked to simplify the IHT treatment of trusts fairly recently. The changes mooted – broadly having only one nil rate band available for lifetime gifting – did not go ahead.
“We will need to see if this will be a measure that makes it harder to reduce your IHT bill or easier to administer the taxation of the trusts,” Cameron said.