Tax Repayments on Settlor-Interested Trusts
New legislation to be introduced in a Finance Bill as soon as possible after the summer recess will require settlors of settlor-interested trusts to pay any tax refunds they receive on the trust income to the trustees. These repayments will be disregarded for inheritance tax purposes. The rule will apply to repayments relating to trust income arising on or after 6 April 2010.
Trust for Asbestos Victims
This measure will exempt trustees of trusts set up to pay compensation to asbestos victims from capital gains tax, inheritance tax and income tax. The trusts that will benefit are those set up on or before 23 March 2010 as part of an arrangement made by a company with its creditors and specifically to pay compensation to, or in respect of, individuals with asbestos-related conditions. The exemption will have backdated effect from 6 April 2006.
Previously, trustees would have been subject to IHT charges every 10 years (periodic charges) on the value of property held in trust above the IHT nil rate band (currently £325,000) and also on certain payments made out of the trust (exit charges). Trustees have also been liable to income tax on income arising to the trust, and CGT on disposals of certain trust assets. This new measure provides for exemptions from the IHT, CGT and income tax charges on the trustees of these types of trusts. For the exemptions to apply, the trust must also be specifically for the purpose of paying compensation to, or in respect of, individuals with asbestos-related conditions.
The legislation will be included in a Finance Bill to be introduced as soon as possible after the summer recess.