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Year End Tax Review 2004

Hostage to fortune

"...but put your money in trust" is an old joke among tax lawyers (who are not known for their knockabout humour). Trusts have been a way of sheltering money from the taxman for a long time, and for almost as long the taxman has been chipping away at the ingenious arrangements of lawyers to get the tax back again.

This year we are promised a number of major changes: the rates of tax on discretionary trusts will go up on 6 April, and there will be new rules to stop settlors of trusts making use of a number of different tax reliefs, in particular the CGT exemption which is available for trust beneficiaries occupying a house as a residence. After that, there will be further reforms which the Revenue is currently discussing with interested parties, and these are likely to remove most of the possible tax advantages of trust structures (until the lawyers spot the loopholes - it's hard for Governments to close them all).

There may still be good reasons to put your money in trust. In particular, you may not trust the person you want to benefit - they may be too young to be given the assets outright. But it looks like many of the tax reasons are about to disappear.