Anti-avoidance ― traps for the unwary

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Trusts and Inheritance Tax

Guidance

The decision of the Supreme Court in Futter and another v HMRC established that it will be much more difficult for trustees and other fiduciaries to set aside actions they have taken that have had unfortunate tax consequences. In the Futter case, trustees acted upon professional tax advice which turned out to be incorrect, and they were obliged to accept the consequences. Accordingly, it is more important than ever that the trustees avoid such consequences and that advisers are alert to the problems that might arise from the actions of the trustees.

This note highlights some of the more common issues from a capital gains tax (CGT) perspective; however, it is not a comprehensive list of the possible traps that may give rise to unanticipated tax liabilities.

Residence status of trustees

The trustees are treated as a single continuing body of persons and therefore a change of trustees does not normally have any CGT consequences. However, if a change in the identity or residence status of one or more of

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Paul Davies

Partner at DWF LLP

I am a partner in the private client department of DWF LLP, based in Manchester. I specialize in providing advice on tax and succession planning to high net worth individuals, executors and trustees. I will assist clients in the creation of wills and lasting powers of attorney and in the creation, restructuring, and dissolution of trusts and other wealth holding vehicles whether onshore or offshore. I often act as a professional executor and trustee.. He has chaired the ICAEW's Employment Taxes & NIC Committee for many years and is a past chairman of the Institute's Tax Faculty. He is also a member of two relevant technical sub-committees of the CIOT.

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