Year End Tax Review 2007 Contents A word to the wise Employee pensions A matter of trust Pension policies Family tax planning Mr and Mrs Inheritance tax Employee cars and fuel Borrowings and tax Tax-free perks Two jobs = too much NIC? Give generously and save tax Children's savings? Company or trade? Capital gains Business tax Investment limits Should VAT be flat?

A matter of trust Trusts may be set up for tax reasons or for other reasons - but the tax rules are important either way. In 2004, the tax rates for trusts went up, so that trusts now pay the same on both income and gains as individual taxpayers. In some cases, a trust will pay higher rate tax, even if the beneficiaries are all lower rate taxpayers. Trustees need to consider whether there is anything they can do to mitigate the higher liabilities. If a trust has a "vulnerable beneficiary" - a disabled person, or a child under 18 one or both of whose parents have died - it's very likely that the beneficiary will have unused allowances and lower rates. The rules allow the trustees to take advantage of the beneficiary's tax reliefs, but the rules are complicated, and professional advice is likely to be needed. In the 2006 Budget, Gordon Brown introduced some very controversial changes to the inheritance tax treatment of trusts. These were presented as a way of stopping rich people avoiding IHT, but trusts are a very common device to protect young people from the dangers of having access to too much money too early, and the effects of the changes may be to increase that risk. Anyone whose will includes a trust, or who has established a trust already, should take advice on the IHT impact of the new rules. Some of the increased charges can be avoided by making changes to "accumulation and maintenance" trusts before 6 April 2008, so it will be important to think about doing that in good time. Action Point! Are you a trustee or a beneficiary of a trust?