In a new consultation document (first announced in Budget 2017) the Government has set out three principles that it believes should underpin the taxation of trusts: transparency, fairness and simplicity.
The consultation on the taxation of trusts seeks views and evidence on the case for and against reform to a series of example areas that it believes do not reflect these principles as well as any other area.
Charitable trusts will want to consider a response to the consultation – the deadline for feedback is 30 January 2019.
- The Government seeks views on whether the principles of transparency, fairness and neutrality, and simplicity constitute a reasonable approach to ensure an effective trust taxation system; including views on how to balance fairness with simplicity where the two principles could lead to different outcomes.
- There is already significant activity under way in relation to trust
transparency. However, Government seeks views and evidence on whether there are other measures it could take to enhance transparency still further.
- The Government seeks views and evidence on the benefits and disadvantages of the UK’s current approach to defining the territorial scope of trusts and any other potential options.
- The Government seeks views and evidence on the reasons a UK resident and/or domiciled person might have for choosing to use a non-resident trust rather than a UK resident trust.
- The Government seeks views and evidence on any current uses of nonresident trusts for avoidance and evasion, and on the options for measures to address this in future.
- The Government seeks views and evidence on the case for and against targeted reform to the Inheritance Tax regime as it applies to trusts; and broad suggestions as to what any reform should look like and how it would meet the fairness and neutrality principle.
- The Government seeks views and evidence on:
- the case for and against targeted reform in relation to any of the possible exceptions to the principle of fairness and neutrality detailed at paragraph 5.6;
- any other areas of trust taxation not mentioned there that would benefit from reform in line with the fairness and neutrality principle.
- The Government seeks views and evidence on options for the simplification of Vulnerable Beneficiary Trusts, including their interaction with ‘18 to 25’ trusts.
- The Government seeks views and evidence on any other ways in which HMRC’s approach to trust taxation would benefit from simplification and/or alignment, where that would not have disproportionate additional consequences.