Tax-lowering counselling

KEY POINTS

• Trusts under attack from the Government.
• Effect of the new additional rate tax for trustees.
• Benefits of settlor-interested trusts.
• Use of interest in possession trusts.

Tax anti-avoidance provisions generally seek to prevent taxpayers from manipulating tax rules to obtain a fiscal benefit. Anti-avoidance rules are often introduced when there is a high differential in two areas of taxation and they seek to prevent a person from moving into the more beneficial regime.

Sometimes while rates of tax change removing or reversing the differential the anti-avoidance rules don’t always keep up and this can lead to some unusual situations.

This is apparent in the provisions for the taxation of trusts where over the last few years there has been significant change in the relevant tax legislation. This has led to some...