HELP - Trust for P6

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HELP - Trust for P6

Postby angeltwin » Tue May 19, 2009 8:30 pm

Hi I was wondering if anyone could give me some more explanation regarding trusts!! i just seem to be gettin very confused and since the examiner has a article out about it recently worrying it might come up..

My knowledge so far (but do correct me if i am wrong) the examiner had been considering the trust implications from the point of view of:-

Income tax (IT)
Capital gains tax (CGT)
Inheritance tax (IHT)

There is two types of trusts:-

1. Interest in Possession trust - this is when the income or use of an asset is passed to the 'life tenant'. Once the life tenant dies this is then passed to the remainderman i.e a husband passes the assets to his wife on death, the wife becomes the life tenant, then when she dies the asset is then passed to the son (the remainderman).

The implications of this are no CGT or IHT when transfering element to wife as it is on death plus have spouse exemption rules, with the income charged IT on any income received from the trust with tax deduction for any tax paid by the trustees. The asset is then passed to the son but is charged on the wifes estate.

What would be the implications tho if it was transfered on life??? Would it become a PET for IHT tax?? Would it be chargable to CGT?!?!!

Also what would happen if transfer to someone else other than spouse on death, would it be included on his death estate?



2. Discretionary Trust - A gift to individual, a asset is placed in trust but trustees have control over how it is distributed to that individual

This is treated as a Chargeable lifetime transfer (CLT) for IHT. For CGT any transfers chargeable to IHT immediately do not get charged CGT.

A exit charge arises for IHT at maximum of 6% and IHT will be chargable on the value of the assets within the trust every 10 years. The trustees will also be chargeable to any Income tax and Capital gains tax arising on assets held in the trust.

The examiner talks about gift hold over relief due to it being immediately chargeable transfer, what does this mean?

I am getting slightly confused aswell in regards to the post and prior to March 06 rule, I realise that it seems to be different names but wasnt sure if the same principles still applied.

Any help would be greatly appreciated!!!! sorry its a long query!!!
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Re: HELP - Trust for P6

Postby Mature-Student » Wed May 20, 2009 12:22 pm

Anna

Just seen this. I haven't got time to answer in full just now, but will come back on when I'm at home this evening.

I hope this is ok.
Passed final ACCA exam 08/2008
Admitted to membership 11/2008
Started studying CIoT 2009
- mad? I think I must be!!!!
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Re: HELP - Trust for P6

Postby LMLM » Wed May 20, 2009 1:35 pm

given how little space its given in the bpp textbook id say its v v unlikely to come up as much more than a v v small part of a big question - espec when they say that certain bits are excluded from syllabus! im still struggling with iht basics so im not even gonna worry about this aspect of the syllabus.
i feel certain remittance basis charge will come up though given its new in 08/09! anyone else have any theories on what they feel is more likely than not to come up?
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Re: HELP - Trust for P6

Postby alan_brown » Wed May 20, 2009 1:54 pm

I think the new reliefs (one new fa2008 and one new at p6)

entrepeneurs relief
eis relief will deifnitely come in
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Re: HELP - Trust for P6

Postby angeltwin » Wed May 20, 2009 6:12 pm

The only thing that concerns me is that the examiner has had a article come out regarding trusts and everythin i mentioned before and it came out in march this year so bit be in exam. I was thinkin it might come up as part of a IHT question and giving advice about the trusts he can set up and tax implications of that!?!?
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Re: HELP - Trust for P6

Postby LMLM » Thu May 21, 2009 3:42 pm

given that the article published nearer to the december 08 exam for P3 was featured in the compulsory question i feel 100% sure this subject you mention will come up - all i can say is keep going over it, do relevant questions and read all the rules over and over, the more you do that the more things stick in your memory! saying that i dont think it would be a whole question
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