10 Yearly Charge iro Discretionary Trust

[harryhoundog]

This is a generalised observation from another "amateur" who has "enjoyed" the role of being an ongoing trustee of various (small) bits of family wealth all his adult life:

Never mind joined up government, there is precious little evidence of joined up administration within HMRC, especially during the recent trauma of introducing a new computer system for Income Tax.

I could give numerous other examples, but some months ago I wrote to the office of the Capital Taxes subsection handling the IHT matters of the estate for which I am executor. My letter in effect said "Though this makes no change to what will be the final account for IHT purposes, do you need to know that the enclosed copy of an "instrument of variation" creates a discretionary trust?".
After a week or few, I got back my documentation and a polite letter that might as well have read:
"Not my job mate - try writing to this address".

Well the administrative trustee of the trust (who happens to be my daughter and mother of one potential beneficiary) has written to the address and is waiting for a reply.

However we now have, through the interweb, access to HMRC's own internal instructions (except where they have been "redacted").
This link, and all its subsequent links, gives a flavour of the internal complexities created by life-time capital taxation.
http://www.hmrc.gov.uk/manuals/ihtmanual/IHTM35000.htm

(There is also a regular newsletter for "practitioners" showing how HMRC struggles to contain the situation of families trying to make rational decisions. that happen to have taxation effects.)

[cliffordpope]

Sorry, I was muscling in because I had a similar query and had been given the same advice by an IFA - ie that that no 10-year account was necessary if the trust value was less then the NRB limit.

It now appears from what maths says that this advice and the HMRC guidance notes were wrong and that a nil return should have been made.

[maths]

Have sadly just lost my reply but haven't got time to retype it all so here a summary !!

1. HMRC comments designed to help but inevitably this leads to oversimplification as happens here on this site where contributors try to help those raising questions without over-complicating matters.

2. Legislation re "excepted settlements" contained in SI 2002/1732 and SI 2008/606. Former applies on or after 6.4.02 to 5.4.07; latter applies on or after 6.4.07.

3. Pre 6.4.07 only exception from filing returns if a so-called "pilot" trust; broadly one where only cash of up to £1,000 in the trust. This exemption continues to apply post 5.4.07.

4. Under SI 2008/606 additional exemptions from filing available. Broadly, amounts involved must be no more than 80% of the nil rate band (however, other amounts need to be taken into account).

5. If you are interested check out:

http://www.hmrc.gov.uk/manuals/ihtmanual/IHTM06000.htm

6. Suggest you write to HMRC providing simple facts and tell them you were under the impression that no returns were necessary and ask for their confirmation; then wait and see.

Nil returns are not required.

[trustqueries]

Many thanks to both Maths and Harryhoundog for your comments

I shall I think once I have talked this over with various relatives do as you suggest write the HMRC and await their response

Rgds