A big feature of the Autumn Statement was a crackdown on tax avoidance measures.
This action is designed to raise £9bn over the next five years.
Within the Autumn Statement, it says “The Government will consult on proposals to split the IHT nil rate band available to trusts with a view to delivering this change alongside simplification of the trust calculations in 2015.”
What this means is that from April 2015, the use of multiple trust arrangements to save inheritance tax will be shut down as a tax planning loophole.
Under current rules, different trusts can benefit from the £325,000 inheritance tax nil rate band before a 10-yearly periodic charge of 6% is calculated.
Trust planning to save inheritance tax in this way is known as the Rysaffe principle.
Rysaffe principles dictate that, where separate trusts are executed on separate dates, they should be treated as unrelated transactions.
From April 2015, Rysaffe trusts will be treated as related transactions and the nil rate band will be applied across all trusts set up by the same individual.
It is still unclear whether these new rules will be retrospective or not, and they could be applied to existing trusts set up in this way.
These new rules confirm our long held belief that the best form of Financial Planning, particularly when it comes to taxation, is the simplest.
More complex tax planning is always at risk of being attacked by government, particularly in times of austerity.
Do speak to us if your adviser has established Rysaffe trusts or if you have any questions about the implications of the Autumn Statement for your Financial Planning.
