Investments  

Draft Finance Bill leaves door open for multiple trusts

Draft proposals issued as part of the forthcoming Finance Bill still allow opportunities for use of multiple trusts, providing additional property is not added on the same day, according to analysis from Old Mutual Wealth.

The ‘Rysaffe principle’ is where multiple trusts are set up on different days so that each trust can benefit from its own nil rate inheritance tax band of £325,000.

If each trust is less than £325,000 then there is no inheritance tax to pay, something which the government has indicated it wants to crack down on.

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In the Autumn Statement the chancellor U-turned on plans to implement a single settlement nil rate band, implying it still believed in the principles behind the proposed legislation, but there are a better ways of implementing it.

However, draft legislation for the Finance Bill appears to provide opportunities for further multiple settlements to be established where additional property is added on different days.

The proposals also introduce new measures for when property is added to multiple settlements on the same day, to ensure the value of all the settlements are be taken into account for both periodic and exit charge calculations.

OM Wealth stated that it is not yet clear how these new proposals will impact existing trust arrangements.

Rachael Griffin, head of technical marketing at the firm, called for more clarity on the new proposals to prevent advisers and clients facing a period of uncertainty.

“It is unlikely the government has changed its mind on clamping down on the Rysaffe practice, and it could be that additional changes are introduced further down the line.

“In the meantime, advisers should continue to assume existing trusts are ring-fenced under the old rules and, to be safe, not add further property to them until there is clarity.”

The government started a technical consultation on the Bill earlier this week, with the industry given three months to air its views before final legislation is drafted.

Yesterday (11 December), OM Wealth published the results of a survey which showed 44 per cent of advisers were in favour of lifting the inheritance tax threshold to £1m.

peter.walker@ft.com