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Giving to Companies and Trusts

By: Mike Watson - Updated: 21 Nov 2012 | comments*Discuss
Companies Trusts Inheritance Tax

In order to make sure your money goes where you want it to you may wish to donate it to a company or trust of your own choosing.

Transferring into a trust enables you to decide where money goes in your lifetime whilst allowing that the money be administered and controlled by a ‘trustee’. Thus has benefits over both waiting until you have died before you give money away and on gifting money in a lump some to people or persons without the watchful eye of a trustee.

Transferring to a company is similar to transferring to a charity, except that you are giving money to a profit organisation. You may wish to do this if you are particularly keen on supporting the work of a given company because you believe in what they do, or because you wish to support the particular people involved in running that company. Take into account that giving a gift to a company is different to giving to any number of the individuals that work for that company, so it may be one further way of benefiting somebody after you have given them what you can it tax exempt gifts over a given period (see related articles for further details).

Law Concerning Gifts and Donations

If what you give to a company or trust exceeds the nil rate band for Inheritance Tax at the time that you make your donation, the amount that you give over the nil rate band will be chargeable at 20% for tax. Note that this is less than the 40% normally chargeable as Inheritance Tax below the ‘nil rate band’. For example, if you give £400’000 to a company at the time of writing this article, you will be liable for tax for the £100’000 above the £300’000 nil rate band that currently applies (for information on rises to the nil rate band see related articles).

The 20% rate applies to donations made in your life time and is instead of the full exemption that is enjoyed on cash gifts to some persons, or in certain amounts. Should you die within Seven Years of making the gift then you will be liable to pay tax on your donation at the full 40% above the nil rate band for in heritance tax. Essentially, you will be liable for tax on the difference between the 20% already paid and the 40% due.

Some donations to a trust are exempt from Inheritance Tax, these include, gifts to a trust for s disabled person, trusts set up to benefit the beneficiary only upon the death of the person who had set up the trust and trusts for a child of the deceased in which the child is not able to access the funds in the trust until they are 18.

Some trusts must pay Inheritance Tax every ten years on the assets that they have accrued over that time.

Those who have set up a trust in the past may wish to exempt themselves from recent changes to the law. They must do this by April 2008.

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