Reading HMRC’s on-going consultation ‘Simplifying Charges on Trusts’ does not give much hope for simplification.
Of the key proposals, ignoring previous lifetime transfers and non-relevant property in relation to trust exits and ten year charges, is clearly attractive. However, while the idea of splitting the nil rate band between every trust a settlor creates -even insurance trusts- may be simple in abstract, but it would be a nightmare for trustees in practice. Even if only trusts created after, say, April 2014 are to be taken into account, in future life would become increasingly complicated for trustees.
Whilst the current rules are complex, they are prescriptive and trustees have the option of asking HMRC to calculate the tax due. Under the proposals, the onus will be on the trustees to do the calculation and to file the necessary return by 31 October, following the tax year as there will be no option to file online. It would be preferable to bring the position wholly into line with self-assessment, as it applies for income and gains tax purposes, so that trustees would have the option of filing before 31 October following the end of the relevant tax year with HMRC calculating the tax or by 31 January, with the trustees calculating the tax.
STEP is completely supportive of simplification but these proposals do not appear to meet that objective.
Wendy Walton TEP, Chair of STEP Technical Committee for England and Wales