Part 1 of 4
This is the Finance Act 2017 version of this article. It is relevant for candidates sitting the Advanced Taxation – United Kingdom (ATX-UK) (P6) exam in the period 1 June 2018 to 31 March 2019. Candidates sitting ATX-UK (P6) after 31 March 2019 should refer to the Finance Act 2018 version of this article (to be published on the ACCA website in 2019).
From the September 2018 session, a new naming convention is being introduced for all of the exams in the ACCA Qualification, so from that session, the name of the exam will be Advanced Taxation – United Kingdom (ATX-UK). June 2018 is the first session of a new exam year for tax, when the exam name continues to be P6 Advanced Taxation (UK). Since this name change takes place during the validity of this article, ATX-UK (P6) has been used throughout.
This article has been written because the taxation of trusts and the transfers of assets to and from trustees is a complicated area of the UK tax system. Accordingly, there is a need to set out the rules that may be examined and those areas where knowledge is not required. However, trusts represent only a small part of the ATX-UK (P6) syllabus and the existence of this article should not be seen as an indication that the taxation of trusts is of particular importance to the ATX-UK (P6) exam.
The requirements of the ATX-UK (P6) syllabus in respect of trusts include:
The following aspects of the taxation of trusts are excluded from the syllabus:
This article only covers trusts created on or after 22 March 2006. Trusts created prior to this date are not examinable.
Trusts enable the benefits arising out of owning property, for example, the receipt of rental income in respect of a commercial investment property, to be enjoyed by someone other than the legal owner of the property. The law of trusts recognises that there can be a beneficial owner of property, known as the ‘trust beneficiary’, who is not the same as the legal owner (whose name is on the title deeds to the property), known as the trustee.
This split of legal and beneficial ownership gives rise to various possibilities including:
In addition, a number of tax planning opportunities arise, including:
Written by a member of the ATX-UK (P6) examining team
The comments in this article do not amount to advice on a particular matter and should not be taken as such. No reliance should be placed on the content of this article as the basis of any decision. The authors and ACCA expressly disclaim all liability to any person in respect of any indirect, incidental, consequential or other damages relating to the use of this article.