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UK Tax consultants visited Guernsey and Jersey last week.Arising from meetings with various trust and company administrators there, a number of tax planning opportunities were identified.
Many trusts which are administered in the Islands have been in existence for many years.If so, then the current tax regime which applies could well be very different from when the trusts were established.The comment was: "The latest changes in the UK to Inheritance Tax are just another example of the way tax law is evolving.Last year, we had the Pre-Owned Asset tax charge and before that there were new Capital Gains Tax rules where trust assets are distributed to UK residents."
These changes are a minefield and it’s recommended that the tax implications for all trust clients should consider being reviewed at least every 5 years.This is the case wherever in the world the settlor and beneficiaries are resident.Extensive research has been carried out into the rules contained in the Finance Act enacted this week.We at ASL are happy to recommend advisors who are happy to advise on those trusts where there is a strong UK connection.
As far as the new Inheritance Tax rules are concerned: The effect might not be quite so severe as some people have suggested.In most cases, there is time to bring planning strategies into play to avoid Inheritance Tax charges.Where the first 10-yearly anniversary is more than 2 years away, in most cases it should be possible to side-step the tax charge at that time.This might avoid the need to restructure a trust, but in some other cases, the best advice might be to change things round or even to wind up the trust.
In the field of Capital Gains Tax, we have advisors who have been working to produce some simple ideas to deal with trusts where there are so-called stockpiled gains.It normally appears that capital distributions or even loans give rise to tax at rates up to 64%!However, with careful planning, the charge can be avoided altogether or, if not, it can be reduced to 25%.
Each case needs to be considered on its own merits.The worst thing to do, though, is nothing.If you would like your trust to be reviewed to see what possibilities exist, please contact your trust administrator here at ASL in the first instance.