A trust is simply an arrangement where assets are held by one or more individuals or a trust company for the benefit of others. Trusts can be established during your lifetime or on your death if included in your will. They are no longer primarily instruments for tax planning, and have a wide range of potential uses for the management and control of family assets.
Trusts are flexible vehicles for the management and control of assets. They are a number of reasons why someone might consider using a trust:
Trusts have some distinct tax considerations and trust income tax can be complex. It is therefore important to ensure they are set up and managed correctly. It is also important to ensure that existing trusts are still appropriate for your needs.
We can advise on the most appropriate UK or offshore trust for you. We can also review existing trusts to ensure that they are still fit for purpose.
Trustees may be required to file self-assessment tax returns in respect of the income and capital gains received by the trust. Trust tax returns can be complex and not every accountant or tax adviser is comfortable completing them.
We can assist trustees with all aspects of UK trust tax as well as tax trust compliance obligations including IHT reporting, if required.
We were asked to advise on the tax implications of an offshore family trust wishing to make distributions to a UK resident beneficiary.
The trustees thought that it would be relatively straightforward to make distributions to the UK beneficiary as tax had already been paid in the offshore trust’s income – any tax due would surely be offset against tax already paid.
Unfortunately, the legislation relating to offshore trusts is extremely complex and it is important to analyse the trust’s historic income and gains to ascertain the tax treatment.
We were able to provide an analysis of the trust’s income and gains and explain that any distributions made to the UK beneficiary would be subject to income tax at 40% with no available foreign tax credit to offset.
We suggested that instead the trust makes a loan to the beneficiary instead.
The loan avoided an income tax charge arising on the UK beneficiary. As we advised the beneficiary to pay the trust the Official Rate of Interest on the loan (currently 2.25%) no taxable benefit arose either.
A trust is a legal arrangement where one or more people (trustees) hold and manage assets for the benefit of others (beneficiaries). Trusts can be set up during your lifetime or included in your will to take effect after your death.
Trusts are useful if you want to make a gift while still maintaining some control, protect assets for children or vulnerable beneficiaries, or ensure your estate is handled according to your wishes, especially in situations like remarriage or illness.
UK trusts are based and taxed in the UK, while offshore trusts are established in other jurisdictions and may have different tax rules. We can advise which structure suits your needs and help you understand the tax implications of each.
Yes, many trusts must file tax returns and may also need to report for inheritance tax (IHT) purposes. We assist trustees with all aspects of trust tax compliance, including complex reporting requirements and trust tax returns.
Absolutely. We can assess whether your current trust is still appropriate for your goals, check its tax position, and help update it if needed. We also advise on restructuring or winding up trusts where they are no longer necessary or providing tax advantages.
