Inheritance Tax

[Doggysoft]

Any gift from the trust is subject to an exit fee tax - a loan isn't a gift, but writing the loan off is a gift.

Trusts and Inheritance Tax - GOV.UK has details

But basically what I was saying is that smaller amounts aren't exempt

Thanks eek.

[eek]

Sorry, can I just ask what this means? I assume it is akin to a millionaire giving away lots of smaller amounts of money to avoid IHT? Is that it?

Any gift from the trust is subject to an exit fee tax - a loan isn't a gift, but writing the loan off is a gift.

Trusts and Inheritance Tax - GOV.UK has details

But basically what I was saying is that smaller amounts aren't exempt

[Doggysoft]

Finally although the amount you owe is less than the inheritance tax threshold, inheritance tax is charged on the entire value of the estate so every loan write off is separately subject to it.

Sorry, can I just ask what this means? I assume it is akin to a millionaire giving away lots of smaller amounts of money to avoid IHT? Is that it?

[eek]

I've asked HMRC for clarification on this and still not had a proper answer. This was their reply.

Inheritance Tax

Many disguised remuneration schemes use a trust as the third party, and therefore Inheritance Tax (IHT) charges can arise if the loan is released (or written off). Any IHT liability can be dependent on the nature of the employer’s scheme and the amounts put through the trust. HMRC holds insufficient information regarding the two schemes used in your case, therefore we cannot rule out future IHT liabilities if our understanding of these schemes changes.

I've not ever had anything in terms of inheritance passed down, but I'm concerned by that wording; that they can and will come knocking whenever they feel like down the line.

Am I being ignorant here or is that what they're saying?

The tax / 'loan' owed back is well under £125k so does this mean it is unlikely that I'll have to pay IHT? The wording of it makes me feel like they're going to try and use me as a blood bank like on Mad Max Road to Fury.

What have other people had said about this?

So in the way a pension allows income tax to be delayed until the pension is being paid, a trust allows inheritance tax to be avoided until the money is gifted to the person who receives it.

If a trust lends you money no inheritance tax is due, because a loan can be recalled but once the loan is written off the appropriate piece of inheritance tax will be need to be paid.

And because most trusts are created to avoid inheritance tax, debts written off by trusts are subject to inheritance tax even if the trust was created by other means.

Finally although the amount you owe is less than the inheritance tax threshold, inheritance tax is charged on the entire value of the estate so every loan write off is separately subject to it.

[Doggysoft]

I've asked HMRC for clarification on this and still not had a proper answer. This was their reply.

Inheritance Tax

Many disguised remuneration schemes use a trust as the third party, and therefore Inheritance Tax (IHT) charges can arise if the loan is released (or written off). Any IHT liability can be dependent on the nature of the employer’s scheme and the amounts put through the trust. HMRC holds insufficient information regarding the two schemes used in your case, therefore we cannot rule out future IHT liabilities if our understanding of these schemes changes.

I've not ever had anything in terms of inheritance passed down, but I'm concerned by that wording; that they can and will come knocking whenever they feel like down the line.

Am I being ignorant here or is that what they're saying?

The tax / 'loan' owed back is well under £125k so does this mean it is unlikely that I'll have to pay IHT? The wording of it makes me feel like they're going to try and use me as a blood bank like on Mad Max Road to Fury.

What have other people had said about this?