Thursday, 19 May 2016

Trustees and the Common Reporting Standard (CRS)


As if FATCA wasn’t enough, UK trustees will have to get to grips with two new reporting regimes next year – the CRS and the European Directive on Administrative Cooperation, or DAC.  The DAC is how the OECD’s Common Reporting Standard (CRS) will be implemented by the EU. 

Thursday, 5 May 2016

Pension death benefits and spousal bypass trusts: time to review


April 2015 saw another radical overhaul of the taxation of UK pensions on death.  Gone is the 55% tax charge on payment of a lump sum death benefit after death, if the pension member either died after their 75th birthday or died pre-75 having already entered into drawdown.  Instead, pension payments from a money purchase pension can now be paid to the member’s nominated beneficiary in the form of either a lump sum, annuity or flexi-access drawdown and no 55% charge is payable at that time.  The nominated beneficiary is taxed at their highest marginal rate of Income Tax in respect of any benefits received.  In addition, the nominated beneficiary can pass on any remaining funds tax free on their death. 

Many defined contribution private pension schemes are set up as trusts so that, on a pension member’s death, the pension trustees decide whom to pay any lump sum death benefit to.  Members are encouraged to sign a letter of nomination – slightly misnamed as the letter is not binding on the pension trustees in any sense.  The rules of certain pension schemes permit the lump sum benefit to be paid to a trust set up by a member in lifetime, often referred to as a spousal bypass trust.  This is also, on its face, a misnomer because it is commonplace for the spouse to be a potential beneficiary of the trust, along with the children, and usually the intention was that the spouse would benefit from it during their lifetime. 

Thursday, 21 April 2016

To keep or not to keep Wills with Nil Rate Band trusts?


Chances are, if you’re British, married and have a professionally drawn Will which predates 2008, you may have a discretionary trust of the Inheritance Tax Nil Rate Band (NRB) in it.  It is often called something like the ‘Legacy Fund’ and, while the exact words may differ, the Will usually provides for a gift of the NRB (currently £325,000 if fully available) to trustees to hold on discretionary trusts for the benefit of the surviving spouse and children.

Having any trust in a Will needs careful thought.  Will trusts add complexity and usually cost something to run after a death occurs.  It is always much simpler for married couples to leave everything to the surviving spouse outright in their Wills, if that is what is desired.  So it’s important to be clear, if you have a NRB trust in your Will, what benefit it may bring your heirs.

Thursday, 7 April 2016

Higher SDLT rates for additional residential purchases: planning points


Here we are in the brave new world of higher Stamp Duty Land Tax (SDLT) rates for certain residential property purchases.  As from 1 April 2016, anyone buying an additional UK residential property, such as a second home or buy-to-let, faces paying a surcharge of 3% above the standard SDLT rates (see my blog of 14 January 2016 for further details of the changes as they were announced in the Autumn Statement 2015).

UK residential property remains a popular investment class for many people who already own their own homes, so are there any planning opportunities?

Thursday, 24 March 2016

Trustees and the PSC Register


From 6 April 2016, virtually all UK incorporated companies (and LLPs, but in this blog I’ll refer to companies only) will have to maintain a register of individuals or entities who control them.  As a result, individuals who either own, directly or indirectly, more than 25% of the shares or voting rights of such companies, or who hold the right to appoint or remove a majority of directors or have the right to exercise, or actually exercise, significant influence or control over the company may receive a notice from the company requiring them to provide information for inclusion on the People with Significant Control (PSC) Register. 

Trusts (UK or offshore) are caught by these new provisions too because the law provides that, if the trust were to be regarded as an individual and, as such, would satisfy any of the above conditions, then those persons who exercise, or have the right to exercise, significant influence or control over the trust are PSCs that need to appear on the company’s PSC Register.

Thursday, 10 March 2016

New dividend taxation rules: what trustees should be doing


The taxation of dividends is set to change in the new UK tax year beginning 6 April 2016.  The 10% dividend tax credit will go, replaced by a new £5,000 dividend allowance that permits the first £5,000 of an individual’s dividend income to be taxed at 0%. Dividends will still sit as the top slice of the individual’s income, so if the dividend would otherwise be taxed at the higher or additional rate of Income Tax (IT) but for the dividend allowance, the allowance gives the individual 32.5% or 38.1% tax relief.  Individuals with significant dividend income have little to cheer about, though, as the allowance is paltry.  Much less has been written about the effect that all this has on trustees, who are not taxed as individuals for IT purposes.  How are trustees going to fare and what planning steps should they be considering?

Thursday, 25 February 2016

Probate fee increases: a death tax by any other name?


Probate fees do not, on the whole, cause much consternation.   After someone dies, an application to the Probate Registry is often needed to obtain a grant – proof acceptable to English financial institutions that they can safely pay over the deceased’s assets to the personal representatives (PRs) named on the grant.  This exercise, one of the few occasions when PRs can swear at a lawyer without anyone getting upset (swearing the oath), is usually fairly straightforward and the application to the Probate Registry for the grant currently costs £155 if done through a solicitor.  However, in its recently published consultation, the Government states that it would like to raise probate fees to £20,000 for some estates.  Yes, £20,000 just to get the grant!  No wonder some quarters of the press have dubbed this another death tax.