Institutes unite on trusts

Financial Director. 05/04/2006

Representatives of several professions join up to call for delays to trust moves announced in the Budget.

An alliance of major institutes across several professions has united to call for a delay in the government clampdown on trusts.

In what is thought to be an unprecedented alliance, representatives of the Society of Trust and Estate Practitioners (STEP), the Chartered Institute of Taxation (CIOT), the Law Society of England & Wales and the Law Society of Scotland, the Low Incomes Tax Reform Group, the Institute of Chartered Accountants in England & Wales (ICAEW), the Institute of Chartered Accountants of Scotland, the Association of Chartered Certified Accountants (ACCA) and the Association of Private Client Investment Managers (APCIMS) have all issued a joint release highlighting problems with the plans.

The move in the budget to align the IHT treatment of trusts, applying new tax charges to accumulation and maintenance trusts and others, have caused widespread uproar as professionals concerned with the vehicles highlight huge unintended effects.

John Riches, STEP's technical committee chairman, highlighted another problem in the release today: 'If you die without making a will and you have children, the statutory rules on intestacy can mean that a trust is automatically set up for your family. This means if someone dies leaving a house in their own name worth £500,000, their family may now have an extra tax bill of £36,000 compared with nil before Budget day.'

Emma Chamberlain of the Chartered Institute of Taxation (CIOT) said: 'It is perfectly right and proper that the government acts to stop unacceptable tax avoidance through use of trusts. However all the professional bodies hope that HMRC and the government will listen to our representations and modify the proposals to ensure that spouses and civil partners remain exempt and that young and vulnerable people can continue to be protected through trusts without suffering a financial penalty.'

The presence of the Low Incomes Tax Reform Group on the list of bodies will add particular pressure to government on the issue, which has tried to maintain that the move will only affect the very well-off trying to avoid tax.

Alex Hawkes, Accountancy