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Colin Jelley: HMRC’s sensible compromise on IHT in trusts


HMRC is not only keen to reduce the complexity and admin burden of the current methodology but also remove the advantage that estate planning with trusts has over planning with wills.

Since the Court of Appeal judgment in the Rysaffe case, there has been judicial authority for most trusts each to have an IHT nil rate band while an estate passing by will is generally only entitled to a single nil rate band.

The proposals seem to be close to a sensible compromise as they introduce simplicity of calculation for new trusts while broadly protecting pre-existing trusts and address the tax loss incurred by the fragmentation of large estates across multiple trusts in the future. 

However, the allocation of only one nil rate band to all future trusts now tilts the balances slightly in favour of estates passing by will rather than by trust. It seems in future large estates will continue to combine wills and estates just as before but with somewhat fewer trusts being created.

It has taken 10 years for the obvious IHT advantage of multiple fragmented trusts to be addressed and the surprise is only in the time that it has taken to get here.

Colin Jelley is managing director of Landmark Financial Solutions



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There is one comment at the moment, we would love to hear your opinion too.

  1. Richard Leeson 12th June 2014 at 2:21 pm

    Please change the headline!!!

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