March 2006 changes to trust taxation

Copyright © 2025 LexisNexis
Produced by a Tolley Trusts and Inheritance Tax expert
Trusts and Inheritance Tax
Guidance

March 2006 changes to trust taxation

Copyright © 2025 LexisNexis
Produced by a Tolley Trusts and Inheritance Tax expert
Trusts and Inheritance Tax
Guidance
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This guidance note covers the changes that were made to trust taxation in the 2006 budget and how trusts were treated before that date. It also details the transitional rules and signposts the user to guidance notes which cover the current tax treatment. This note provides useful background information for those dealing with trusts established before 22 March 2006.

The 22 March 2006 changes

22 March 2006 was the day of the 2006 Budget which, without any warning or consultation, made sweeping changes to the IHT treatment of trusts. The date represents a watershed in the IHT treatment of trusts since many of the key changes took immediate effect. To work out the correct IHT treatment of a trust today, it is necessary to look at whether it was made before or after 22 March 2006.

Before 22 March 2006, trusts fell into the following three main categories for IHT purposes:

  1. •

    relevant property (RP) trusts, which were usually discretionary trusts

  2. •

    interest in possession (IIP) trusts, and

  3. •

    accumulation and maintenance

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  • 26 Nov 2024 08:42

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