Digital assets and cryptoassets—trusts, tax and compliance

Introduction to cryptoassets and blockchain for Private Client

This Practice Note explains the phenomenon of cryptoassets, namely assets which are issued using distributed ledger technology, alternatively known as blockchain technology. It explains what blockchain is and the different types of blockchain. It also discusses cryptocurrency and initial coin offerings. Finally, it considers the application of this phenomenon to trusts and probate and considers estate planning advice.

See Practice Note: Introduction to cryptoassets and blockchain for Private Client.

Taxation of cryptoassets

Cryptoassets and the systems that use them are still being developed. The international approach to the regulation of cryptoassets is still in its infancy. However, the UK and other jurisdictions have developed some rules and guidelines on how virtual currencies

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All in? Court confirms when a settlement is 'made' for the purposes of excluded property (Accuro Trust (Switzerland) SA v The Commissioners for HMRC)

Private Client analysis: This case considered the meaning of 'relevant property' under the settlements regime of the Inheritance Tax Act 1984 (IHTA 1984) and, in particular, the time at which this definition is to be tested. The question arose as to whether the trustees of an offshore trust established by a non-UK domiciled settlor were subject to the UK settlements regime in respect of property added to the trust after the settlor became deemed domiciled in the UK, or whether they were exempt from such charges as the trust consisted solely of excluded property. The First-tier Tribunal (FTT) held that whether trust property is excluded property is based on the status of the trust at the time that it was established, not at the time that the property in question was added to the settlement. As a result, the trust in this case did consist solely of excluded property and no inheritance tax (IHT) charges arose as a result of either the ten-year anniversary or capital distributions. The FTT was also asked to consider whether their jurisdiction was appellate, or supervisory only. The FTT held that, while their jurisdiction was supervisory, the questions raised by the trustees were relevant in establishing whether HMRC had acted reasonably and that the outcome (ie that the paid IHT should be refunded and that no further IHT was due) would be the same in either case. Written by Katherine Willmott, senior associate solicitor at Foot Anstey LLP.

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