Trust me, you need to read this...

I get a lot of inquiries from new clients about trusts, both in the UK and further afield (dare I say the word that shall not be mentioned "offshore"?).

These can revolve around whether they would be beneficial to their tax planning for the future, or protecting assets for vulnerable beneficiaries for example. However, in recent months I have started to see a worrying trend in these inquiries, so much so that I thought it was worth writing a blog post about it...

So, what is it that has me so concerned I hear you ask? Well, in the space of 5-6 weeks I seem to have come across several new clients who have a trust as part of their estate and financial planning who have had absolutely no tax advice concerning the ongoing management of their trust. Usually, this is a result of the said trust having been set up by the bank, an insurance company, or in at least one case their stockbroker/financial adviser. Sure, they've had inheritance tax advice about putting the assets into a trust, but that seems to be where it stopped.

This can lead to more than one issue, here's a list of the potential problems:

• The trust hasn't been registered with HMRC for income and capital gains tax, as a result of which no self-assessment tax returns have been filed by the trustees;
• If you have a discretionary trust, or any kind of lifetime trust created from 2008 onwards, then you may have missed a 10-year charge event;
• If you have the above types of trust and have paid capital out of the trust to the beneficiaries at any point, then you might have missed an exit charge event.

These are just the three main issues that I am seeing come up, and to be honest as a tax, trust & estate expert it is more than a bit worrying. These are the handful of cases that get picked up, either because they've sought further advice, or they have suddenly realised there is a problem and want to correct it! Unfortunately, HMRC doesn't accept ignorance as a justifiable excuse, so all of these transgressions come with penalties and interest attached too!!!

So, if you have a family trust, and what I've listed above sounds quite familiar, then I urge you to get in touch, either with me, or your accountant, or just your nearest neighbourhood Tax-Superhero!

With the upcoming extension of the HMRC's trust registration project its in your interest to tell them before they find you (oh, and did I mention that trustees can be personally liable to HMRC and the trust beneficiaries for these types of transgression?)