The current system of trusts for taxation purposes is being modernised in a bid to provide greater consistency between income and capital gains tax (CGT) in relation to trusts, and a new test will be put in place from 2007 to test UK residency, says HMRC.
Details of the Regulatory Impact Assessment for trust modernisation point out taxation of trusts is currently a complex area, so changes are being made to clarify common meanings which determine who is the trustee, who gains from the trust, and how it should be treated for tax purposes. More importantly, additional moves to align inheritance tax treatment of trusts will also affect people currently holding 'interest in possession' trusts (IIPs) as they will no longer meet IHT rules, as is the case for 'accumulation and maintenance trusts' (A&Ms). This essentially means most assets held in...
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