The measure

Following on from the consultation held this summer on the 'simplification' of IHT charges on trusts, the Government has announced that a further consultation will be held. The consultation will further consider the proposal to split the inheritance tax nil rate band based on the number of trusts created by the same settlor, which will affect the inheritance tax payable by the trusts on each ten year anniversary or on distribution of assets from the trusts.

The Government announced on 5 December 2013 that the new rules will apply from April 2015, though draft legislation is to be included in Finance Bill 2014.

The consultation held over the summer contained proposals to add income which had accumulated in the trust to trust capital after either two or three tax years for the purposes of calculating inheritance tax charges. It was announced on 5 December 2013 that the Government is instead considering applying a five year limit.

'Uplift provisions' that rebase the value of assets held in qualifying vulnerable beneficiary trusts for CGT purposes to market value on death will be extended with immediate effect from 5 December 2013. Also, the range of trusts which qualify for special income tax, CGT and IHT treatment due to qualifying as a vulnerable beneficiary trust will also be extended, from 6 April 2014.

Finally, the Government has also announced that an online service will be made available during 2015/16 for inheritance tax compliance. The Government also intend to simplify IHT return filing and tax payment deadlines.

Who will be affected?

Individuals who have or intend to establish more than one trust, trustees of those trusts and trustees of vulnerable beneficiary trusts.


The extended uplift provisions for CGT tax which apply on the death of the vulnerable beneficiary of qualifying trusts will apply with immediate effect from 5 December 2013.

The range of trusts which qualify for 'vulnerable beneficiary' status will be extended from 6 April 2014.

The changes to IHT on trusts which apply to non-vulnerable beneficiary trusts will take effect from 6 April 2015. It is also expected that IHT online filing and simplified tax payment and filing dates will take effect from 2015/16.

Our view

Dependent on the outcome of the consultation (and based on the options which the Government outlined in the consultation document published in summer 2013) trusts which have been established by an individual who has settled property into multiple trusts may be subject to increased IHT charges if the available nil rate band, which is used to calculate trust charges, is reduced.

This may be of particular concern where one or more trusts are in existence which do not hold sufficient assets to utilise the nil rate band available, with other trusts holding property worth in excess of the available nil rate band.

We await details of whether any grandfathering provisions will be available for trusts which are already in existence.

We welcome the proposed increase to five years for the length of time from which income retained within relevant property trusts will be added to trust capital for the purposes of the ongoing inheritance tax charges.

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