UK Law and Practice Contributed by: Ros Bever, Claire-Marie Cornford, Helen Clarke and Ashley Hill, Irwin Mitchell
The FIG regime offers some benefits for UK-resident settlors of trusts that are settlor interested in relation to trust income and gains from 6 April 2025. From 6 April 2025, the TRF (Temporary Repatriation Facility) is available for distributions from a non-UK- resident trust to a UK-resident individual that can be matched with gains or income arising before that date. This offers scope for beneficiaries to benefit from reduced rates of tax on pre-6 April 2025 matched income and gains within a limited three-year tax win - dow (2025/6 to 2027/8). It is for the individual rather than the trust to opt in to these transitional reliefs and undertake related report - ing. Trustees of offshore trusts may wish to consider seg - regating pre- and post-6 April 2025 income and gains for ease of administration and effective use of the above-mentioned concessions. 3.4 Exercising Control Over Irrevocable Planning Vehicles UK law recognises irrevocable trusts as binding legal arrangements but also permits a range of mecha - nisms to introduce flexibility. Unlike in some other jurisdictions, UK trust deeds do not typically include the appointment of a trust “pro - tector” with power of oversight separate from the body of trustees. While the settlor of a UK trust is typically excluded from benefitting from the trust fund (to avoid adverse tax consequences), the settlor may retain indirect influence by way of: • acting as one of the trustees; • the trust deed providing that the power to appoint new trustees is reserved to the settlor during the settlor’s lifetime; and • a detailed letter of wishes that the trustees will generally feel morally obliged to follow unless there is some good reason to depart from it.
It is not typical for UK trusts to allow trustees to act by majority. Instead, all must agree when exercising decision-making powers. Modern UK trusts are typically drafted to provide a strong degree of flexibility, often via general overriding powers of appointment, allowing trustees to rearrange the distribution of capital or income among beneficiar - ies while considering what is in their interests, from time to time. Trustees are also usually granted very broad admin - istrative powers in the trust deed, going beyond what is provided for by statute, including: • power to delegate functions (even irrevocably); • power to apply capital for the benefit of discretion - ary beneficiaries (even during the lifetime of the primary intended beneficiary); • power to alter the trust period or change the gov - erning law; and • power to vary or add to administrative powers. Trusts have traditionally been the go-to means of pro - tecting family wealth being passed through the gen - erations, including in the context of succession for the family business. Trusts have long been valued as providing a layer of protection against the circumstances and choices of individual beneficiaries (providing at least a line of defence, albeit not immune from attack, in the context of divorce). Tax rule changes are due to take effect in April 2026 which, broadly speaking, will limit 100% BPR and APR to a value of GBP1 million across any number of trusts settled by the same individual. The rule change will also affect the amount of APR and BPR assets that can be transferred into trust without a lifetime IHT charge on the transferor. These changes will likely make trusts somewhat less attractive as an asset pro - tection vehicle for holding assets qualifying for APR and BPR. 4. Family Business Planning 4.1 Asset Protection
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