10 Yearly Charge iro Discretionary Trust

[trustqueries]

Following the death of her uncle my mother (the sole beneficiary under his will ) set up a discretionary trust in 1988 into which she placed some shares (part of the Estate) which were then worth circa £90K. This was done using a deed of variation at the time.

The value of the assets today (cash and shares) is circa £98K

Unfortunately due to our ignorance we have never completed a 10 yrly charge form. About 7 years ago my mother withdrew £10k from the trust and I am now concerned at the implications that this may now have in terms of the 10 yearly charge. Presumably a 10 yearly return should have been sent into HMRC in 2008?

Do you know what my liability will be in terms of the switch of £10k to my mother? - a friend has told me that because the trust is well under the current IHT threshold I should not worry is that correct?

Many thanks in advance for your help

[harryhoundog]

Has the trust being reporting to HMRC for IT (income tax) and CGT (capital gains tax) purposes?

The nil rate band refers to IHT (InHeritance Tax)

http://www.hmrc.gov.uk/rates/iht-thresholds.htm

[maths]

No IHT charges but penalties for failing to complete the relevant returns.

[trustqueries]

Hi Harryhoundog and Maths

Firstly my thanks to you both for taking the trouble to respond.

Regular annual returns since inception have been made to the Revenue iro income and CGT if applicable. I recently exchanged letters with HMRC and they are happy in terms of of the tax returns up to and including 5 April 2010.

That said is there a possible penalty for not making the 10 yearly returns, due 1998 and again in 2008 even though from what has been said no IHT charges would have applied since the Trust value has always been well under (sadly) the IHT threshold

Many thanks

[cliffordpope]

It says on the HMRC website about the 10-year charge:

"You need to fill in form IHT100 Inheritance Tax Account to tell HM Revenue & Customs (HMRC) when Inheritance Tax is due on a trust."

That appears to be saying that if no tax is due then you don't need to fill in a form. I hope that is true!

[maths]

"You need to fill in form IHT100 Inheritance Tax Account to tell HM Revenue & Customs (HMRC) when Inheritance Tax is due on a trust."

That appears to be saying that if no tax is due then you don't need to fill in a form. I hope that is true!

Hope is fine, but perhaps unfulfilled this time. Often comments on HMRC website whilst helpful are not typically exhaustive.

IHT100 may need to be completed whether IHT due or not.

The rules re IHT100 and discretionary settlements have changed over time.

The details are contained in SI 2002/1732 (for pre 6.4.07) and currently SI 2008/606 "Inheritance Tax (Delivery of Accounts) (Excepted Settlements) Regulations".

[cliffordpope]

Oh.

Can you outline the circumstances in which a return is required after 10 years even though the value is less than the NRB and no IHT is due?

Further search of the HMRC Notes for Guidance says:

"Completing form IHT100 Inheritance Tax Account

You will need to complete form IHT100 Inheritance Tax Account if Inheritance Tax is due on assets passed into or out of a trust, or on the trust's ten-year anniversary if it's above the Inheritance Tax threshold. "

That seems pretty clear, and downright misleading if it is not true.

Our trust was worth £10 at the previous (missed) 10-year anniversary, and will be under the threshold at the next in 3 years time.

[maths]

Are you and "trustqueries" different persons or are your queries related?

[trustqueries]

Hi Maths

No I am not related in any way to 'cliffordpope' but it looks like he/she has a similar query

For my part it looks like I should write to HMRC and 'come clean' in terms of not having filed the 10 yearly returns even though it seems no tax would have been payable.

Lets hope HMRC are in a good mood when I contact them!!

[maths]

Trustqueries

Haven't checked the historic limits but I suspect that a 10 year return should have been filed in 1998; possibly no return necessary in 2008; and a return on the 10K appointment in circa 2004.