Article by Richard Sowler, Partner, Veale Wasbrough Lawyers, Bristol. This article appeared in the May 2005 issue of Tax Adviser. This article follows from Richard Sowler’s article in May 2004 which concluded by noting that the Inland Revenue were intending to publish draft legislation on Modernising the tax system for trusts at the time of the 2004 PBR. It has proved more complicated than that. No draft legislation was forthcoming and on Budget day the Revenue published a feedback paper on the responses to the condoc issued on 13 August 2004 and a further discussion paper, with a deadline of 10 June 2005. The unresolved matters are: income streaming, definition of a trust, residence test for trusts, and sub-funds election. However, ministers have felt able to proceed with two aspects of the original proposals. These are the introduction of a lower rates band for trusts, applying from 6 April 2005, and a special regime, applying from 6 April 2004, for trusts for vulnerable persons, and this article considers them.
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