Trust  

Tax abuse cases create trusts 'image problem'

Tax abuse cases create trusts 'image problem'

Privacy concerns are discouraging the use of trusts and causing some people to miss out on legitimate tax planning opportunities, Quilter has warned.

Rachael Griffin, tax and financial planning expert at Quilter, said trusts are currently suffering an "image problem" as a result of privacy perceptions and heavily publicised high profile tax abuses.

The warning follows the latest trusts statistics published by HM Revenue & Customs yesterday (February 14), showing the number of trusts and estates for which a full self-assessment are required fell to 156,500 in 2016-17 from 163,500 in 2015 to 2016.

HMRC reported declining trust numbers were part of a prevailing trend, with this year representing the third consecutive annual fall in the number of trusts and estates.

Ms Griffin warned some people are foregoing the chance to exercise control over how their estate is distributed as trusts become less attractive.  

A perception that trusts represent an attempt to disguise assets from the tax authorities has been encouraged by high profile tax abuses publicised in recent years, Ms Griffin said.

She added: "These are totally unrelated incidents and should not discourage legitimate use of trusts, yet it appears they are being tarred with the same brush."

Ms Griffin said she also fears some people are being discouraged from using trusts over concerns they may not provide the level of privacy needed.

She said: "Since the Trust Register was introduced tens of thousands have had to register, and that is likely to be extended to non tax paying trusts as well. 

"It seems that some people may be dissuaded from using a trust because they’re concerned Big Brother could be using it to peer into their private affairs."

According to HMRC's figures the total income reported in respect of trusts and estates fell by 17 per cent from £2.9m in 2015-16 to £2.4m in 2016-17, as the amount of capital gains tax paid rose slightly from £620m to £635m. 

Ms Griffin said it is important to remember trusts are not solely about tax planning and can play a key role in helping individuals control how they pass on wealth.

She added: "We can all sympathise with that desire to control how your estate is distributed and it is a shame if people are being denied that opportunity. 

"Anyone looking at estate planning should speak to a professional adviser to get personal advice on their options."

rachel.addison@ft.com