The statement of practice, published by the Inland Revenue, follows legislation that was introduced last year to tighten the rules governing people who hand their property to a trust to avoid inheritance tax – but continue to live in it.
Some properties have been placed in Jersey-based trusts but as most cater for foreigners living in the UK, the industry is not overly concerned by the government’s latest release.
‘When the legislation was introduced last March it looked very threatening,’ said Richard Brooks, a director at Regent Tax Consultants, which is an arm of the Royal Bank of Canada.
‘It said that if someone continued to enjoy the use of their house, they could have income tax charged on the use of that asset or they could unscramble the plan before 5 April 2005.
‘There has been lots of speculation as to how it would affect non-domiciled residents and the Jersey trust structure.
Anyone running a trust for a client needs to be aware of the legislation but it is not going to be as widespread as first envisaged.
It is unlikely to be applied as ruthlessly as initially thought and far fewer structures will be caught – although any prudent adviser should be bearing it in mind.
