HMRC has published a further consultation on simplifying the calculation of IHT charges on trusts at ten yearly intervals or when assets are transferred out of the trust and making fairer the way the nil-rate band is allocated as part of those calculations, for comment by 29 August 2014.
This consultation, which is the third one on this subject, focuses on simplifying the trust charge calculations for relevant property trusts and how the nil-rate band should be applied to such charges.
Earlier consultations in 2012 and 2013 set out options on how IHT periodic and exit charges on trusts that hold or dispose of relevant property can be simplified, and sought views on proposals to align payment and filing dates for these charges and examined the treatment of accumulated income.
Taking into account the key problem areas identified in responses received from the earlier consultations, this latest consultation sets out an alternative model for applying the nil-rate band in conjunction with a simplified method of calculating the ten-year and exit charges.
The revised model for applying a nil-rate band available to trusts is based on a statutory obligation on settlors requiring them to make an election that sets out how they wish their settlement nil-rate band (SNRB) to be allocated between the settlements they have made.
The election would enable the settlor to specify, in percentage terms, but subject to certain conditions, how much of their SNRB should be allocated to each trust.
The fundamental premise of the revised model is that the responsibility for determining how the SNRB is allocated lies with the settlor.
The revised proposal, therefore, shifts the administrative burden away from trustees and provides them with the certainty they need when calculating trust charges.
The consultation closes on 29 August and the document is available at https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/317871/140605_Final.pdf