Year End Tax Review 2009/2010 Contents Lead articles The year ahead... This year, next year Pension hit Employees Too much NIC NIC and pensions Company cars Tax-free benefits Business - General Time to incorporate? His and hers Family bonus Profit and loss Show me the money Can't pay, won't pay? Turning back the clock Business - VAT Standard VAT or flat VAT? VAT goes down - must come up? European revolution A good start for VAT Happy returns? Investments Top-up savings Rainy day money Capital Gains Gains favoured Splitting gains A place in the country Holiday lets end Families Family fortunes Where there's a Will Credits and debits Piggy banks Still trustworthy? Administration Penalty shoot-out Paperwork, paperwork Pay tax later Opportunity knocks again Charity Give and save Non-Domiciled People Home and away Interest Interesting times

Still trustworthy? Trusts may be set up for tax reasons or for other reasons - but the tax rules are important either way. Trusts pay the same tax rates 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. Discretionary trusts are going to be hit with the highest income tax rate in 2010/11 - 50% - and the trustees of such trusts need to consider urgently whether there is anything they can do about these heavy tax costs. It may be worth paying out all the accumulated income before 6 April 2010, creating a life interest, or investing to produce capital gains in future (on which a trust only pays CGT at 18%). 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 2006, 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 if they have not already done so. It may be better to leave the trust in place and suffer the tax, but it will be important to understand what the liabilities are. Action Point! Are you a trustee or a beneficiary of a trust?