{"id":374,"date":"2015-12-07T12:00:46","date_gmt":"2015-12-07T12:00:46","guid":{"rendered":"https:\/\/lancasterclements.co.uk\/?p=374"},"modified":"2015-11-30T12:49:49","modified_gmt":"2015-11-30T12:49:49","slug":"considering-ongoing-use-of-pilot-trustsrysaffe-planning","status":"publish","type":"post","link":"https:\/\/www.lancasterclements.co.uk\/considering-ongoing-use-of-pilot-trustsrysaffe-planning\/","title":{"rendered":"Considering ongoing use of pilot trusts\/Rysaffe planning"},"content":{"rendered":"<p><strong>What are Pilot Trusts?<\/strong><\/p>\n<p>A Pilot trust is set up during the lifetime of an individual in order to receive funds and\/or property upon their death from a legacy in their Will, a pension fund, a life insurance payout or a death-in-service benefit. Also known as feeder trusts or family bypass trusts, they are normally discretionary and can be created with as little as one pound in the original trust document.<\/p>\n<p><strong>Taxation of trusts<\/strong><\/p>\n<p>The changes to the taxation of lifetime trusts proposed in last year&#8217;s Budget, but postponed in the Autumn Statement, have now been resolutely kicked into touch. The Chancellor has confirmed that the proposed to introduce a so-called &#8216;settlement nil rate band&#8217;, which would be spread across all lifetime trusts created by the same settlor, will not now be introduced.<\/p>\n<p>However, the Government will still pursue ways of reducing tax avoidance through the use of multiple trusts (so-called &#8216;Rysaffe planning&#8217;). The details on this are to follow, but it has been confirmed that:<\/p>\n<ul>\n<li>The rules will only apply to additions to more than one relevant property trust made on the same day<\/li>\n<li>There will be a de minimis of \u00a35,000 (i.e. additions of \u00a35,000 or less will not be treated as a same day addition &#8211; allowing for additions to cover trustee fees, for example)<\/li>\n<li>The calculations will be simplified so that non-relevant property will not have to be included in the calculation of the relevant property charges (i.e. ten-year anniversary charges and exit charges)<\/li>\n<li>The grace period for additions to existing will \u00a0trusts where the will was executed before 10 December 2014 will be extended to included\u00a0deaths occurring before 6 April 2017.<\/li>\n<\/ul>\n<div id=\"attachment_384\" style=\"width: 186px\" class=\"wp-caption alignright\"><a href=\"https:\/\/lancasterclements.co.uk\/wp-content\/uploads\/2015\/11\/example_copeland_7-year-trusts.jpg\"><img loading=\"lazy\" decoding=\"async\" aria-describedby=\"caption-attachment-384\" class=\"size-medium wp-image-384\" src=\"https:\/\/lancasterclements.co.uk\/wp-content\/uploads\/2015\/11\/example_copeland_7-year-trusts-176x300.jpg\" alt=\"HMRC's 7 year Trusts Proposal\" width=\"176\" height=\"300\" srcset=\"https:\/\/www.lancasterclements.co.uk\/wp-content\/uploads\/2015\/11\/example_copeland_7-year-trusts-176x300.jpg 176w, https:\/\/www.lancasterclements.co.uk\/wp-content\/uploads\/2015\/11\/example_copeland_7-year-trusts-600x1024.jpg 600w, https:\/\/www.lancasterclements.co.uk\/wp-content\/uploads\/2015\/11\/example_copeland_7-year-trusts-624x1065.jpg 624w, https:\/\/www.lancasterclements.co.uk\/wp-content\/uploads\/2015\/11\/example_copeland_7-year-trusts.jpg 703w\" sizes=\"(max-width: 176px) 100vw, 176px\" \/><\/a><p id=\"caption-attachment-384\" class=\"wp-caption-text\">HMRC&#8217;s 7 year Trusts Proposal<\/p><\/div>\n<p><strong>Potential Impact<\/strong><\/p>\n<p>The potential impact is simple: where settlors have more than one relevant property trust, the trusts could end up paying more inheritance tax under these proposals.<\/p>\n<p><strong>Pilot Trusts<\/strong><\/p>\n<p>A similar situation arises with pilot trusts. The examples given by HMRC in the May consultation ignore this type of tax planning, but if the proposed new rules are applied to a typical pilot trust arrangement, the outcome is likely to be far from tax neutral.<\/p>\n<p>The inheritance tax treatment of pilot trusts was confirmed in Rysaffe Trustee Co (CI) v CIR [2003] STC 536.<\/p>\n<div id=\"attachment_389\" style=\"width: 164px\" class=\"wp-caption alignright\"><a href=\"https:\/\/lancasterclements.co.uk\/wp-content\/uploads\/2015\/11\/example_copeland_pilot-trust.jpg\"><img loading=\"lazy\" decoding=\"async\" aria-describedby=\"caption-attachment-389\" class=\"size-medium wp-image-389\" src=\"https:\/\/lancasterclements.co.uk\/wp-content\/uploads\/2015\/11\/example_copeland_pilot-trust-154x300.jpg\" alt=\"Pilot Trusts by HMRC\" width=\"154\" height=\"300\" srcset=\"https:\/\/www.lancasterclements.co.uk\/wp-content\/uploads\/2015\/11\/example_copeland_pilot-trust-154x300.jpg 154w, https:\/\/www.lancasterclements.co.uk\/wp-content\/uploads\/2015\/11\/example_copeland_pilot-trust-525x1024.jpg 525w, https:\/\/www.lancasterclements.co.uk\/wp-content\/uploads\/2015\/11\/example_copeland_pilot-trust.jpg 615w\" sizes=\"(max-width: 154px) 100vw, 154px\" \/><\/a><p id=\"caption-attachment-389\" class=\"wp-caption-text\">Pilot Trusts by HMRC<\/p><\/div>\n<p>Furthermore, part D26 of HMRC&#8217;s <a href=\"https:\/\/www.gov.uk\/government\/publications\/tax-avoidance-general-anti-abuse-rules\" target=\"_blank\"><strong>GAAR Guidance<\/strong><\/a> states that HMRC accepts pilot trusts as a long-established tax planning practice and they are not regarded as abusive for the purposes of the GAAR.<\/p>\n<p><strong>Conclusion<\/strong><\/p>\n<p>If you need have any concerns on the process or require further information please\u00a0<a href=\"https:\/\/lancasterclements.co.uk\/contact-us\/\">contact us<\/a>.<\/p>\n<p>If you want to read more about the various topics and services we provide, then please go through our\u00a0<a href=\"https:\/\/lancasterclements.co.uk\/faqs\/\">FAQs<\/a>.<\/p>\n<!-- AddThis Advanced Settings generic via filter on the_content --><!-- AddThis Share Buttons generic via filter on the_content -->","protected":false},"excerpt":{"rendered":"<p>What are Pilot Trusts? A Pilot trust is set up during the lifetime of an individual in order to receive funds and\/or property upon their death from a legacy in their Will, a pension fund, a life insurance payout or a death-in-service benefit. Also known as feeder trusts or family bypass trusts, they are normally [&hellip;]<!-- AddThis Advanced Settings generic via filter on get_the_excerpt --><!-- AddThis Share Buttons generic via filter on get_the_excerpt --><\/p>\n","protected":false},"author":3,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1],"tags":[11,10],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v22.3 - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>Considering ongoing use of pilot trusts\/Rysaffe planning - Lancaster Clements<\/title>\n<meta name=\"description\" content=\"pilot trusts and inheritance tax, Rysaffe Planning\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.lancasterclements.co.uk\/considering-ongoing-use-of-pilot-trustsrysaffe-planning\/\" \/>\n<meta property=\"og:locale\" content=\"en_GB\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Considering ongoing use of pilot trusts\/Rysaffe planning - 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