Budget 2024 – Next Steps for Trustees

This alert is prepared to provide those in the industry with some ideas as to what the potential next steps are and highlight some of the key considerations that will need to be worked through to determine how structures, and those connected to these, are impacted.

In some cases the clock is ticking already and whilst some measures such as the temporary repatriation facility (“TRF”) lasts three years, there is a sliding scale of increasing tax rates, with the most benefit being provided in the tax years ended 5 April 2026 and 5 April 2027. Therefore, this is one time where doing nothing is simply not an option.

In light of the TRF there is likely to be some clients that decide to take advantage of this and close their structures down in order to secure a headline rate of tax of 12%. Whilst this may well disappoint some in the industry, this is likely to be beneficial to most smaller structures which are likely, on any reading, challenging to run on a cost-effective basis.  This represents a good opportunity to potentially tidy up your book of business.

Our recommended next steps include the following, in no particular order, with the exception of the first point...

1. Identify any structure that has a UK resident settlor - this will form the basis for your list of potentially impacted structures to work through.  
2. Liaise with them to advise that they and their structure are likely to be impacted by the budget from 6 April 2025. Make enquiries with them to understand their historic residence position prior to creating the trust, with emphasis on date of first arrival into the UK, and then any subsequent periods of non-residence.
3. Establish for relevant settlors if they ever made a claim for the remittance basis of taxation.  This would only apply for periods after 2008/09, so do ask the question.
4. Identify structures where there is a beneficiary resident in the UK and the date of their arrival into the UK.
5. Identify structures where there is the possibility of a beneficiary becoming resident in the UK in the short to medium term.
6. Try and establish long term intentions of the UK residents for those identified in points 1, 4 and 5 above.  For example, are they planning on leaving the UK after the youngest child has finished school?  Are there simply in the UK attending university,  or is the beneficiary going to stay long term in the UK as they now have a long-term partner?  All of these factors will help decide the best way for the future of the trust.
7. Stockpiled gains and relevant income schedules should be brought up to date as a matter of priority.  If there are no stockpiled gains and relevant income schedules, consider the cost of preparing the same and whether paying tax on all assets may give a better overall result.
8. Consider the benefits of potentially making distributions under the TRF to reduce the tax burden to 12% for the tax year ended 5 April 2026, rather than 45% for relevant income and/or 38.4% for stockpiled gains.
9. Consider the potential benefits of making a rebasing election, and the consequences of such an election. In some instances it may not be beneficial to make the election.
10. Schedule all ten-year anniversary dates and also when the settlor will become UK long term resident as this will highlight future ten-year charges post April 2025.
11. Consider future distribution policies, especially where the settlor is already long-term resident, to limit the potential administrative impact of the relevant property regime applying post April 2025 and the onerous IHT reporting as a result of this.

Our role and how we can help

The changes announced are vast and complex and will affect many of your clients.

1. We have prepared flow charts which can be used to help understand how your clients are impacted, to understand what the best course of action may be. We can also help categorise your clients with common issues.
2. It is vitally important that you understand your client’s future plans. We can assist with the preparation of non-technical tailored wording to go out to your clients explaining the changes and how they may be impacted.
3. Prepare relevant income and stockpiled gains schedules.
4. Preparation of IHT returns.
5. Prepare formal comprehensive tax advice that is easily understood.
6. Assist with any historic and future tax compliance reporting obligations.
7. Provide a diary of key dates and events that may impact your clients.
8. Round table discussions with yourselves and your colleagues which work through the budget changes, explain how these may impact your clients.
9. Provide training sessions for your staff so that they can identify the key concerns so that you can proactively help your clients.

We have the capability to offer you as much or as little support as you require to assist you navigate these important changes.

If you would like to discuss anything mentioned above, please do not hesitate to get in touch one of the contacts below.