Trusts in decline...?

It comes as no surprise that the number of trusts has declined over the years given the changes introduced in 2006 bringing most trusts within the harsher inheritance tax rules known as the "relevant property regime".

In addition, the global drive towards transparency - the Common Reporting Standard, the Trust Registration Service, the new Money Laundering Regulations, as well as the proposed measures such as the register of offshore owners of UK property and the widening of the trust register by the EU due to be implemented by 2020 - all mean that lack of privacy is becoming a major disincentive to creating trusts.

Trusts have in recent years been (wrongly) viewed purely as a vehicle for tax avoidance, and their legitimate uses have been curtailed by this misconception.

The government has opened a consultation on reforming the taxation of trusts, which ends on 28 February 2019. The good news is that the consultation notes that trusts have proper and valuable uses, and the tax regime should neither encourage nor discourage individuals from establishing trusts. 

The review may lead to further changes and compliance requirements, and it is hoped that this consultation does not lead to yet more complexity and potential uncertainty than the existing rules currently in place.