for financial advisers only

Tax & Trusts

HM Revenue & Customs published its final consultation on the simplification of trusts in a document called 'Inheritance Tax: A fairer way of calculating trust charges' on 6 June 2014.

This article explains the capital gains tax implications for any individual selling and repurchasing these units within this 30 day window.

Inside Tax & Trusts

Trust rules

This article looks at the tax consequences of making an appointment, or changing an individual’s interest or entitlement, under a pre-22 March 2006 trust.

This article is intended to assist financial advisers in completing the IHT100 Forms following the declaration of a Skandia/Royal Skandia Discounted Gift Trust (Discretionary version) or Skandia/Royal Skandia Discretionary Trust (Settlor excluded and Settlor included versions).

This article is a summary of some of the features of the Skandia Absolute and Discretionary (Settlor excluded) Trusts. It is not intended to be exhaustive and should be read in conjunction with Skandia’s other technical material available here.

In the following article, references to the current UK tax rates mean rates in the tax year ending on 5 April 2014 (tax year 2013/2014).

This article outlines why it is important for an adviser to establish the full gifting history of a settlor who makes gifts into discretionary trusts for inheritance tax purposes.

This article summaries the judgement provided by the Court of Justice of the European Union regarding gender discrimination in relation to insurance premiums and its affect on Discounted Gift Trusts.

Rachael Griffin explains the importance of an impartial trustee.

This article considers Skandia’s approach to facilitating fees from investment bonds which are subject to a Skandia trust.

In guidance published on 6 August 2013, HM Revenue & Customs (HMRC) set out its view on the basis that should be used for Discounted Gift Scheme calculations in future.

Its outcome was that from 1 December 2013 discounts calculated for new discounted gift schemes have to be gender neutral. At the same time the interest rate used to take account of the effect of inflation on the settlor’s fund would be reduced to 4.5%.

Inheritance Tax

This article outlines the Pre-owned assets tax rules relating to intangible property and in particular offshore bonds. Pre-owned assets tax was introduced to impose an income tax charge where UK resident taxpayers successfully circumvent the gift with reservation of benefit rules for UK inheritance tax.

When making gifts for inheritance tax (IHT) purposes, it is essential to consider the order in which gifts into trusts are made. The order in which gifts are made will dictate the future taxes applicable to the trusts created, as the following case study demonstrates.

This article explains the iheritance tax planning benefits of making regular gifts out of income. This article assumes that you are familiar with the basic workings of inheritance tax.

Following the changes to IHT on 22 March 2006, HM Revenue & Customs (HMRC) stated that new reporting thresholds would be introduced. The regulations on ‘Inheritance Tax (Delivery of Accounts) (Excepted Transfers and Excepted Terminations)’ were laid before Parliament on 6 March 2008 and came into force on 6 April 2008 and applies for the 2007/08 tax year onwards.

This article explains the UK inheritance tax treatment of a discretionary trusts or a trust which is subject to the relevant property regime.

There are a multitude of different types of registered pension scheme and a great degree of flexibility that can be exercised by the scheme member over the timing and form of benefits that can be taken. Consequently, this can make the interaction with inheritance tax a little complicated.

The following illustrative case studies demonstrate how making gifts out of income to use the normal expenditure out of income exemption can work in practice.

This article sets out the allowances for UK inheritance tax on transfers between spouses or civil partners (as defined in the UK Civil Partnership Act 2004) where one or both are either UK domiciled or non-UK domiciled.

Income Tax

This article addresses the taxation position of trustees and beneficiaries in receipt of dividend income and savings income generated from trust assets. It does not consider all scenarios and Skandia recommends that independent tax advice be sought in all cases.

This article looks at the income tax treatment of trusts created by an individual, when their unmarried minor children are beneficiaries of the trust.

This article provides a high-level summary of who is liable to tax when an asset is held in a trust.

This article looks at the main Qualifying Policy rules and conditions that must be met in order to retain the tax advantages associated with qualifying policies.

The Budget on 21 March 2012 introduced important changes to tax rules around qualifying policies. Here is a summary of the changes and how they affect new and existing policies.

This article covers the tax treatment of trail commission and fund rebates following HMRC clarifying their position.

Under the UK statutory residency test, you are either UK resident or non-UK resident for a full tax year and at all times for that tax year. If, however, during the year you either leave the UK to live or work abroad, or come from abroad to live or work in the UK, you may be eligible for the tax year to be split into two parts:

Rachael Griffin examines the new Statutory Residence Test which can be used to determine whether an individual is resident or not in the UK.

This article outlines how returns will be taxed for collectives, UK life assurance, offshore life assurance or an offshore capital redemption contract when purchased by a UK company after 1 April 2008.

This article explains how the tax charge works for individuals affected by the high income child benefit charge.

By introducing FATCA, the US hopes to gather a sizeable amount of tax owed by US persons. Gordon Andrews tells us more.

Capital Gains Tax

This article sets out the main rules relating to capital gains tax (CGT).

When considering disposing of assets, you need to be aware of the clients complete fund holdings rather than just the holding they may wish to sell. Holding a fund direct as well as via a collective such as Skandia's Collective Investment Account may mean the gain or loss realised is more or less than expected. Although the introduction of Section 104 holdings simplified the old rules it does have the impact of dragging older gains into charge quicker.

This article looks at how equalisation operates and why it is important when calculating Capital Gains Tax (CGT) for collectives.

Final draft legislation was published on the 31 January 2013 entitled 'The Collective Investment Schemes (Tax Transparent Funds, Exchanges, Merges and Schemes of Reconstuction) Regulations 2013' and is yet to be laid before parliament. It confirms that regardless of the mechanism for an exchange of units (i.e. either conversion or a switch) providing the exchange meets the conditions in section 103F then no capital gains tax event will apply. While this is obviously good news, on a practical level there is still some outstanding clarification required regarding equalisation.

The Finance Act 2013 has confirmed an alignment of the income tax and Capital gains tax rules for temporary non-residency.

This article details how these changes impact individuals with life assurance or redemption bonds who move abroad for a temporary period during their bond ownership.

New Regulations have simplified the tax treatment of switches between share classes within a sub-fund.

How tax-friendly are your client’s financial affairs? Phil Carroll looks at the impact of current rules and the potential tax planning issues.


The following article summarises the key areas identified from the Chancellor’s Autumn Statement that are likely to affect UK financial advisers and their clients.

Phil Carroll takes a look at whether the Chancellor’s Autumn Statement has any effect on tax-year end planning.

The UK Budget took place on 20 March 2013. A summary of the changes relevant to advisers and their clients are detailed below.

Rachael Griffin analyses the highlights… if you can call them that.

The UK Budget took place on 19 March 2014. A summary of the changes relevant to advisers and their clients is detailed below.


This article provides an overview of the HMRC rules applying to Value Added Tax (VAT) on adviser charging and discretionary fund management (DFM).