What price simplicity? Julie Man remains unconvinced by HMRC’s latest strategy
On 6 June 2014, HMRC released a further consultation I nheritance tax: a fairer way of calculating trust charges . To date, this is the third consultation published as part of their continuing mission to establish simplification, reform and reduce the administrative burden for trustees in calculating inheritance tax (IHT) on relevant property trusts. Though this process may appear benign, underpinning the whole strategy is HMRC’s policy to achieve this “without jeopardising Exchequer revenue”. The third consultation sets out proposals for a simplified application of the 6% anniversary charge and the treatment of the nil-rate band where a settlor has made a number of lifetime trusts.
Charging basis
Most private client practitioners will be familiar with the charging basis of relevant property trusts which require calculations for 10 year anniversary charges at 6% on the value of the trust fund over the applicable nil-rate band at the anniversary, together with exit charges based on a proportion of this 6% when property leaves the trust. These calculations can be complex because of the
