Taxation of Trusts Flashcards
If a gain occurred under a trust in a year where the UK resident settlor is still alive or in the year of their death, how would this be taxed?
The gain would be taxed on the settlor but they can recover from the trustees any tax they pay
If a gain occurred in a year after the settlor’s death, or if the settlor is non-UK resident, how would this to be taxed?
Providing at least one of the trustees is resident in the UK, the gain would be taxed on the trustees.
What is the tax rate applicable to trusts?
45% but because of the basic rate tax credit, the liability would be 25%
If a gain occurred in a year after the settlor’s death, or if the settlor and all trustees are non-UK resident, how would this to be taxed?
Any UK beneficiary who receives a benefit from the gain will be taxed on that amount at their prevailing tax rate (but without top slicing)
What is the annual gift exemption?
£3,000 each tax year
What is the tax rate applicable to gifts transferred between spouses?
Nil, all gifts between each other are exempt as long as they’re both UK domiciled
What time period must a gift or trust sustain for it to become outside the donor’s estate?
7 years
If an existing policy is placed in absolute trust or disabled trust, or is an outright gift to another, would this be an exempt transfer or a potentially exempt transfer?
A potentially exempt transfer
When would a transfer of value be relevant?
If a policy is gifted or put into trust during its lifetime, rather than inception, this would be a transfer of value from the settlor’s estate
In relation to a transfer of value, what is the value of the policy?
The greater of the premiums paid to the date of the transfer or the open market value of the policy, which is normally the SV unless the life assured is in serious ill health
If a policy is gifted or put into trust during its lifetime, will all future premiums be considered as gifts or not considered as gifts?
Considered as gifts
