A discretionary trust set up on or after 11 April 1994 becomes subject to a once-off 6% levy based on the value of the assets in the trust on the latest of the following events:
- The date property is placed in settlement,
- The date of death of the settlor, or
- The date on which the principal beneficiaries of the trust all attain the age of 21.
The 6% charge is reduced to 3% where the trust is created under a will and where all of the assets of a discretionary trust are appointed within 5 years of the assets being transferred to the discretionary trust.
Following the trust becoming subject to the 6% levy, a 1% levy is payable on each year (except the year in which the 6% levy is paid) on the market value of the assets in the trust.
The 6% and 1% tax also include entities that are “similar in effect” to trusts for example foundations which do not require trustees.
