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TAX: Testing the waters

16 June 2017  

Steve Appleton and Joshua Eaton outline HMRC’s new approach to trusts and the taxation of index-linked loans

Before the introduction of the transferable nil rate band (TNRB) on 9 October 2007, the nil rate band discretionary trust (NRBDT) was a common tool used by solicitors to ensure that spouses took full advantage of both of their nil rate bands (NRB). It worked by the first spouse to die making a gift (the gift) of their available NRB allowance to the trustees of a discretionary trust which included the survivor amongst the class of discretionary beneficiaries. The trust assets would then usually pass to the intended beneficiaries on the death of the survivor. The survivor would still have their own NRB available to set against their free estate. As such, both NRBs were utilised.

Additional Info

  • Case(s) Referenced:

    Lomax (H M Inspector of Taxes) v Peter Dixon & Son Ltd [1943] 2 All ER 255