HMRC has published the outcome of its recent consultation over proposals to simplify inheritance tax (IHT) charges on trusts, and says it will now be looking into the question of the application of the nil-rate band in more detail.

The report on the consultation Inheritance tax: simplifying charges on trusts says respondents welcomed the key themes of simplification and alignment, although several expressed concerns that plans to align filing and payment dates with those of the self assessment regime could add considerable pressure to the administrative burden for trustees at a busy point in the tax year.

As a result of the consultation, HMRC is now proposing to introduce a new rule providing for the treatment of accumulated income to apply to the ten year anniversary charge only. Filing and payment dates are to be aligned to six months after the end of the month in which the event occurred.

Draft legislation for inclusion in Finance Bill 2014 on the treatment of accumulated income and the alignment of payment and filing dates was published on 10 December for technical consultation, and HMRC is welcoming comments by a deadline of 4 February 2014.

However, the consultation showed that most respondents were strongly opposed to the proposals for dividing the nil-rate band, on the grounds that it would be an onerous task for trustees to try and gather details of all the trusts the settlor had set up. Secondly, they felt that the proposals were unfair and amounted to retrospective legislation if the proposed changes were applied to existing trusts.

As a result, HMRC is now saying it will consult further on alternative proposals to split the nil-rate band. It has also put the simplification of the calculations on a slightly slower track so that any new legislation is introduced in Finance Bill 2015, and similarly deferred the proposal to require trustees to 'self assess' IHT due.

More details are available on the HMRC website HERE