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Fundsnetwork warning over HMRC methodology on DGTs

Fidelity FundsNetwork is urging IFAs to ensure their trust providers are adopting the new Her Majesty’s Revenue & Customs methodology for discounted gift trust rates.

The new rates are effective from September 1, reducing the discount on DGTs.

The changes from HMRC will mean an increase in the valuation rate of interest to be used in connection with valuing retained rights under DG schemes from 6 per cent to 6.75 per cent.

The effect of the increase in the interest rate will be to reduce the amount of discount – which should reduce by 3 to 8 per cent, depending on the profile of the client.

FundsNetwork business development director for trusts and tax planning Paul Kennedy says he welcomes the current HMRC stance, which provides guidance to providers and should start to remove major differences in discount levels.

He says: “Whatever method of calculation is used, discount figures need to be broadly similar to those used by HMRC.  If they are not then this could create massive problems for clients and their families in the event of death or even during life.

“Knowing that you are using discount figures in line with HMRC guidance is crucial in today’s trust environment. We urge advisers not to search around for the highest discounts but to ensure that any figures illustrated are in line the HMRC guidance.”


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