The Autumn Statement

Much of the Autumn Statement delivered by the Chancellor on 5th December 2013 was taken up by a discussion of general economic policy rather than tax charges likely to impact directly upon trustees, or the administration of a deceased’s estate. However, the accompanying document did provide some detail which will probably be of interest to readers. First of all, it will no doubt be remembered that Government was consulting on changes to be made in the way that IHT was charged on the occasion of the ten yearly “Periodic charge” and the “Exit” charges when property left the settlement, under the ”Relevant Property” rules contained in Chapter III of Part III IHT Act 1984. Generally, these are discretionary trusts, and, of course, almost all trusts created by lifetime transfer. The formulae, in sections 66 and 68 IHT Act 1984 under which the rate of tax charged on these occasions is calculated, bring a nil rate band into the calculation. The decision of the Court of Appeal in CIR v Rysaffe (2003) STC 536 showed that it might be advantageous for a single settlor to create a large number of relatively small settlements, rather than one big one. To counter this, the original suggestion in the consultation was that, in calculating the rate of charge for any particular settlement, the nil rate band to be taken into account should be reduced in proportion to all the other settlements, made by the same settlor. There was no suggestion of any limitation as to the number of such settlements to be taken into account or the time scale over which they may have been executed. There was also a suggestion that undistributed income should be deemed to be accumulated and added to capital a surprisingly short time after it had arisen. The document accompanying the Autumn Statement had this to say: