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CGT hike brings stealth tax for trustees

The emergency Budget has introduced a new stealth tax on trustees which industry experts suggest could present a great financial planning opportunity for advisers.

In his first Budget as Chancellor, George Osborne (pictured) yesterday announced that trustees and personal representatives of deceased persons will be liable to CGT at 28 per cent whereas individuals will continue to pay 18 per cent if their total taxable gains and income fall below the higher rate income tax threshold. 

Trust and estate practitioner Paul Willans says this is the first time in recent years when those administering an estate may be liable to a higher rate of tax on gains realised. 

He believes it could have consequences for estates holding assets such as shares that could grow significantly before the estate is wound up and distributed.  He says, depending on the eventual legislation in the Finance Act, it may be possible to mitigate such tax by transferring assets with gains in specie to beneficiaries or earmarking them for interim distributions to reduce CGT exposure.    

He says: “They could be paying considerably more tax than if the asset had been passed to the beneficiary straight away, rather than gathering up all the assets, paying off liabilities, selling assets and passing the net amount as cash to the beneficiaries.”

Prudential tax and trust manager Gerry Brown says: “This is a tax planning strategy which should be adopted rather than having the trustee sell their assets and passing the proceeds out to the beneficiary.  The beneficary would be possibly taxable at 18 per cent as opposed to the trustee’s 28 per cent.” 

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  1. Sounds like a boost for Life Assurance Investment Bonds and thus the life assurance industry ~ which will doubtless frustrate those at Canary Wharf intent on bashing the life assurance industry into oblivion.

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