The Government has U-turned on its proposals to introduce a single nil-rate inheritance tax band across multiple trusts.
In June HM Revenue & Customs put forward proposals to allow those using multiple trusts to divide the £325,000 nil rate band between them as they see fit, while married couples could control how they allocated their £650,000 allowance.
Under current rules, an individual can establish several trusts and as long as they are set up on different days each has its own £325,000 nil rate band.
As part of its Autumn Statement the Government says that following a consultation it will not introduce a single settlement nil-rate band.
It adds that it will introduce new rules to target tax avoidance through use of multiple trusts and will simplify the calculation of trust rules but did not give any more details.
The intended rules of the single settlement nil-rate band were due to come into force on 6 June 2015 and would have been applied from 6 June this year.
This was to avoid people taking advantage of the current rules to set up multiple trusts with their own nil rate bands before the new rules come in.
Old Mutual Wealth head of technical marketing Rachael Griffin says: “This appears to be a U-turn on the Government’s previous position. This is potentially good news in terms of removing the administration burden for the settlors of trusts, but advisers face a period of uncertainty regarding what they should do with existing trusts.”
HMRC first consulted in August 2013 on changing the rules relating to so-called “pilot” trusts so that the £325,000 nil-rate inheritance tax allowance is split between the trusts rather than each trust having its own £325,000 allowance.
An updated consultation on the proposed rules, published earlier this year, says respondents to the August consultation found the arbitrary split between trusts put forward by HMRC “unacceptable”.