Case Studies: Trusts

We advised our client on the tax implications where funds had been added to a trust

Our client approached us for advice on inheritance tax reporting in relation to a family trust, explaining:

“I have a family trust established in 2009, with a ten-year reporting requirement for inheritance tax purposes. This needs to be dealt with on the coming 2019 anniversary. I would like advice on the liability due and guidance on how the trust will be affected in future.”

How we helped
On reviewing the trust documentation, it became apparent that, although the trust was set up in 2009, it had received substantial funds after this date from another trust that had, itself, been established in 1960. This was, therefore, a trust to trust transaction and meant that the trustees had to potentially consider two reference dates for the inheritance tax reporting. The 1960 trust had also added funds to another separate trust which belonged to our client’s cousin and therefore the implications of this had to be taken into account.
We set out a report for our client detailing the background to the legislation, which was relevant to the matter in hand, and advising on what reporting would be necessary now and in the future. 
The outcome
The inheritance tax returns and the tax payable was submitted to HM Revenue & Customs which brought the compliance up to date. Our client was made aware of the implications of making distributions from the trust in the future and what will be required at the relevant reporting deadlines going forward.
In general, trustees should be very wary of adding any funds to a trust and the tax implications that this might have. We recommend that if anyone is thinking of setting up or adding funds to a trust that they seek professional advice before doing so.
Written: July 2020

We helped a client with assets in multiple jurisdictions to create a tax efficient structure

Our client was non-UK domiciled but had been resident in the UK for a long time. They explained:

“I have assets in multiple jurisdictions and a need a structure that will co-ordinate my worldwide estate in a tax efficient way.”

How we helped
We prepared a report for the client dealing with the succession and potential UK tax implications of the ownership of the assets in the various jurisdictions and recommended a structure so that his worldwide estate would be structured in the most tax-efficient way. We then liaised with advisors in the various jurisdictions with regard to the preparation of the client’s international Wills and also to ensure that there are no adverse tax implications, with reference to the structure, in the various jurisdictions.
The outcome
The client now has peace of mind that his worldwide estate is now coordinated and structured in the most tax-efficient manner.
Written: July 2020

Where there are issues around the identify or validity of trustees, we can help

Our client was grappling with a complex trust matter with a long history, they told us:

“I’m involved with a long-standing trust set up in the 1950s. Over the years there have been various historical issues involving the misuse of trust funds. Right now, I need advice in relation to a dispute regarding the identity of the trustees. A Deed of Appointment and Retirement of Trustees has been put in place, but its validity is in question and now there is a disagreement as to the identity of the trustees.”

How we helped
We advised the client as to the validity of the Deed and the procedure under the Trustee Act 1925 to remove a trustee on the grounds of their refusal to act. We then put the appropriate procedure in place and prepared the required documentation in order to remove the trustee. Finally, we liaised with all the parties involved in the dispute and managed to negotiate an agreed course of action in order to resolve the position, to the satisfaction of all the parties. We then prepared the documentation to put the arrangement in place thereby settling the outstanding dispute. 
The outcome
We helped the client negotiate a resolution of a dispute which had been causing significant distress.
Written: July 2020

We restructured a trust to maximise tax efficiency

Our client was concerned about the structure of a trust, saying:

“I’m concerned that the way this trust is structured does not protect one of the discretionary beneficiaries or provide maximum tax efficiency. I need specialist advice on these issues.”

How we helped
We reviewed the trust and advised the client in relation to its restructuring in order to ensure an element of protection for one of the discretionary beneficiaries and maximise its tax efficacy.
The advice involved considering the terms of the trust and advising as the manner in which the trust should be restructured. It also included advising as to the Inheritance Tax, Capital Gains Tax and Income Tax of the proposed rearrangement for both the trustees and the individual beneficiary concerned. 
The outcome
The client was satisfied that their trust had been restructured to maximise its tax efficiency, giving them peace of mind.
Written: August 2020

We resolved our client’s concerns around tax in relation to a trust previously unknown to the HMRC

Our client came to us with concerns about a trust with no tax paperwork, saying:

“I need help to make sure tax is up to date on a trust comprised of a residential property, occupied by a beneficiary. The trustees believe that HMRC is not aware of the trust’s existence, and have not, up to now, submitted any paperwork at all in relation to tax. According to a recent valuation, the property is worth more than £750,000.”

How we helped
We reviewed the deeds, confirming that the beneficiary was entitled to occupy the trust property. Following further discussion with the Trustees, we confirmed that the beneficiary had been the sole occupant for the entire eleven-year life of the trust. 
Based on the valuation to hand, we advised there was likely to be a charge to Inheritance tax on the trust’s ten-year anniversary in the previous year. We also recommended, in view of the value involved, that the trustees engage a suitably qualified surveyor capable of providing a formal valuation specifically for the purposes of Inheritance tax. 
Recognising that the ten-year anniversary charge was the trigger for registration with the Trust Registration Service, we gathered the necessary information from the trustees and completed the online form on the trustees’ behalf. At the same time, we requested an Inheritance tax reference from HMRC.
Subsequently armed with a professional valuation (which was appreciably lower than that already provided) and the Inheritance tax reference, we completed the appropriate inheritance forms and calculated the Inheritance tax due. The forms were signed by the Trustees and we then arranged their submission, along with payment to HMRC. We then successfully negotiated with HMRC to mitigate the Trustees’ exposure to penalties for late submission and late payment. 
As the final part of our service, we provided advice to the Trustees in relation to what scenarios could generate further tax liabilities in the future.
The outcome
The Trustees’ tax affairs had been brought up to date and both the tax and penalties had been reduced due to our efforts on the Trustees’ behalf. The Trustees were also now better informed as to what to look out for in the future. 
Written: June 2020