Trustees: Need to Know 3 – Tax is not the only reason

Trusts are subject to Income Tax, Value Added Tax, Capital Gains Tax and Inheritance Tax in much the same way as individuals.  Each tax has important differences in the way it treats trusts, generally treating the trust as a higher rate taxpayer with little or no personal allowance.  Inheritance Tax in particular has a special regime for the taxation of some types of trust, where tax is levied every 10 years on a revaluation of trust assets.  Tax should never be the driving force behind the creation of a trust, but it is important that trustees have a broad understanding of the tax position.

This will be one of the topics reviewed in more depth during the forthcoming Trustee Training Events at Rhug estate and Ragley Hall, organised in conjunction with the CLA. For more details:

Trust Programme Spring 2015

This is the third of 10 brief ‘Need to Know’ notes for trustees and their professional advisers.

Trustee Development Spring 2015

The personal responsibility of an estate trustee far exceeds that of a company director, shareholder, limited liability partner or sole trader. This responsibility extends to settlors and beneficiaries, and many others besides. Many people rely on rural estates for their livelihood and homes. Estates are under wider public scrutiny on a scale never experienced before. The complexities of farming and rural estate management have never been greater. New business opportunities abound for the creative estate manager, but the prospect of commercial reward comes with risk.

Working with the CLA we have devised a one day trustee training course which includes a tour of an award-winning estate. The Rhug estate will be our host on 17 March 2015, and we are delighted to be visiting Ragley Hall for the first time on 21 March.

The programme will ensure that estate trustees know their job: a vital safeguard for settlors, beneficiaries, estate managers, other professional advisers and, not least, trustees themselves.

Training Outcomes
On successful completion you should:
• Understand the extent of the personal responsibility of a trustee to beneficiaries;
• Understand the trustees’ role, authority and responsibility in the management of a rural estate;
• Participate effectively in trustees’ meetings and other trust business;
• Relate effectively to beneficiaries, settlors, staff, key advisers and other interested parties in the strategic management and direction of a rural estate

To book a place please follow this link:

https://www.dropbox.com/s/gsuas1gvrojpiib/Trust%20Programme%20Spring%202015.pdf?dl=0

Alternatively, please email Charles Cowap, cdcowap@gmail.com or call Charles on 07947 706505, or use the contact form below. RICS members, chartered accountants and solicitors will be able to claim formal CPD in respect of their participation.

One wood worth £70,000 but potentially five different Inheritance Tax bills ranging from nil to £28,000. Capital Gains Tax with potential bills on disposal ranging from less than £5,000 to more than £11,000.  This Wednesday’s web class will explain how to keep the tax bill down.  It will also look at the wider benefits that might be available to an estate that keeps its woods in good order.  RICS Web classes are not restricted to RICS members.  They provide a very cost-effective way to make sure you are up to date from the convenience of your own computer, and because they are ‘live’ you have all the benefits of being able to ask questions, and take part in online discussions.  This class in particular is highly relevant to anybody with an interest in private woodland ownership and management.

Details here: http://www.rics.org/uk/training-events/e-learning/web-classes/woodland-taxation-valuation/online/ 

Woodland Complexities

The latest Rural Briefing from RICS addresses the challenging area of woodland taxation and valuation.  A lot can go wrong as the examples we presented at yesterday’s South East Rural Update Conference demonstrated.  One wood worth £70,000 but potentially five different Inheritance Tax bills ranging from nil to £28,000.  Capital Gains Tax was little better with potential bills on disposal ranging from less than £5,000 to more than £11,000.

A link to the briefing paper and an introduction to it can be found here.

These slides summarise the paper.  David Lewis and I presented them at the RICS South East Rural Update on 24 February 2014.

Two further observations emerged during the conference discussion. Ensuring that woodlands can be recognised as a business asset may help to tip the balance in a ‘Balfour’ appraisal of a rural estate, helping to ensure that the majority of estate activity can be recognised for Business Property Relief from Inheritance Tax. This would not only save potentially high IHT bills on woodland assets themselves, but also on other estate assets which might otherwise be unrelievable. Another follow-up question concerned the production of biomass for ‘own use’. This could indeed be a grey area, but one approach may be to ensure that the value of the timber sales is clearly accounted for in estate and woodland records.