Responding to the inheritance tax consultation: APR and BPR changes and trusts
CLA Tax Adviser Richie O’Dowd reviews the government’s consultation on agricultural and business property relief (APR and BPR) changes in relation to trusts
The CLA has provided a detailed response to the UK Government’s consultation on reforms to inheritance tax and the application process in relation to trusts.
As with many things coming to us from government at the moment, we fear that the devil will be in the detail. There is still no draft legislation and the CLA is pushing for it to be published as soon as possible so that it can be properly scrutinised and its impact on our members assessed.
Inheritance tax changes in relation to trusts
The consultation has confirmed that all trusts will have a £1m allowance for agricultural and business property relief (APR and BPR) assets. However, it indicated that the allowance would not be transferrable between spouses. This seems particularly unfair as the other nil rate bands for inheritance tax are both transferrable. The CLA is lobbying strongly on this point.
What was not clear in the consultation is how the allowance will be allocated between multiple trusts – particularly those whose value has increased. We are also concerned that multi-generational trusts for children/grandchildren inheriting assets will be significantly impacted. The way the allowance is allocated could result in younger beneficiaries losing out on the allowance relief entirely - which feels entirely unjust.
As with the broader proposed changes to the inheritance tax rules, the direction of travel seems to be towards more regulatory compliance. This is an area which we are particularly mindful of due to the impact that AI may have going forward. The professional (and therefore often expensive) valuations that are going to become necessary when calculating tax charges (such as the ten-yearly anniversary charge) is only going to increase that burden on trustees going forward.
The positives
To finish on a more upbeat note, it would be wrong to say the consultation contained only bad news.
The CLA was pleased to note that the treatment for trusts created before 30 October 2024 and for the transitional period (up to April 2026) will remain broadly the same until the changes come into effect after 6 April 2026. This offers some reassurance to our members with existing trust arrangements already in place.
In addition, confirmed in the consultation was an extension to the interest free instalment option for the payment of inheritance tax. This is a step in the right direction and hopefully indicative of a softening in the government’s position to the changes more broadly.