The Government has confirmed it will close a loophole allowing the use of multiple trusts to avoid inheritance tax charges from 2015.
In the Autumn Statement today, the Treasury said the changes will take place alongside simplifications of trusts.
In May, HMRC launched a consultation proposing a change to the rules on multiple trusts with regards to the £325,000 nil-rate inheritance tax allowance and how it applies to the 10 yearly 6 per cent charge.
At present each split trust set up by the individual is granted the £325,000 nil-rate allowance before the 10 yearly 6 per cent charge is levied.
However, HMRC will now apply the allowance across all the trusts set up by the individual when it comes to calculating this charge.
Concerns have been raised that the change could apply retrospectively to fit in with the Government’s simplification agenda.
The Treasury will also now move to simplify filing and payment dates for IHT relevant property trust charges.
Skandia head of wealth planning Colin Jelley says: “This new piece of legislation looks set to have a significant impact on existing trusts. Clients’ existing arrangements will need to be reviewed to ensure they are structured in the most tax efficient way possible. Although the proposed change in legislation means a greater tax liability for some trustees, with inheritance tax on death set at a substantial rate of per cent, using trusts could still be an attractive option for many families despite the maximum charge of 6 per cent every 10 years.”