Part 1 of 4
This is the Finance Act 2013 version of this article. It is relevant for candidates sitting the Paper P6 (UK) exam in 2014. Candidates sitting Paper P6 (UK) in 2015 should refer to the Finance Act 2014 version of this article (to be published in 2015).
This article has been written because the taxation of trusts and the transfers of assets to and from trustees is a complicated area of the UK tax system. Accordingly, there is a need to set out the rules that may be examined and those areas where knowledge is not required. However, trusts represent only a small part of the Paper P6 (UK) syllabus and the existence of this article should not be seen as an indication that the taxation of trusts is of particular importance.
The requirements of the Paper P6 syllabus in respect of trusts include:
The following aspects of the taxation of trusts are excluded from the syllabus:
This article only covers trusts created on or after 22 March 2006. Trusts created prior to this date are not examinable.
The ability of trusts to solve problems stems from the fact that trusts enable the benefits arising out of owning property, for example, the receipt of rental income in respect of a commercial investment property, to be enjoyed by someone other than the legal owner of the property. The law of trusts recognises that there can be a beneficial owner of property, known as the ‘trust beneficiary’, who is not the same as the legal owner (whose name is on the title deeds to the property), known as the trustee.
This split of legal and beneficial ownership gives rise to various possibilities including:
In addition, a number of tax planning opportunities arise, including:
Written by a member of the Paper P6 examining team
The comments in this article do not amount to advice on a particular matter and should not be taken as such. No reliance should be placed on the content of this article as the basis of any decision. The author and the ACCA expressly disclaims all liability to any person in respect of any indirect, incidental, consequential or other damages relating to the use of this article.