Government does u-turn on trust tax

The Budget wouldn’t be the Budget without at least one u-turn by the government, and this year’s was no exception.

Alistair Darling’s first Budget reveals that the expiry date for interest in possession trusts has been extended from 5 April to 5 October 2008.

Back in March 2006 the government unveiled significant changes to the way some trusts, including interest in possession, are taxed. Trustees of interest in possession trusts, which provide an income for life to a beneficiary, were given until 5 April to name the ultimate beneficiary or face periodical charges as well as exit charges for inheritance tax.

However, the Budget has granted trustees an additional two months to name the beneficiary or face the burden of inheritance tax.

Julie Hutchison, estate planning specialist at Standard Life, said: “My impression is that, to date, many trustees have been taking a ‘wait and see’ approach, to leave decision-making to the end of the transition period so as to allow changing family circumstances to be taken into account.

“This area is rather technical and trustees should take legal advice before acting. There are both great opportunities and pitfalls here.”

That's not all! For the rest of our Budget 2008 coverage, click here

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