In July 2014 £800,000 was placed into a Discretionary Will Trust following the Settlors death, for the benefit of his children/grandchildren/charities.
The Trust Funds have largely been on bank deposit or loaned to some of the beneficiaries (interest free).
Now, in 2023 the Trust Fund is worth approximately £850,000 (an increase of £50,000 over the last 9 years).
In 2024 (within 6 months) the Trust will be 10 years old, and as such due to pay HMRC the 10-yearly Periodic Charge.
The Trustees are aware that this Periodic Charge is “broadly 6%” every 10 years.
The question is, “broadly 6%” of what???
(a) 6% of the entire Trust Fund. i.e. 6% x £850,000 = £51,000 tax.
(b) 6% of the Trust Fund in excess of the nil rate band. i.e. (£850,000 - £325,000) x 6% = £31,500 tax.
(c) 6% of the “growth” on the Trust Fund value over the past 10 years. i.e. 6% x £50,000 = £3,000 tax.
(d) A Periodic Charge of some other amount.
The range of tax outcomes is very wide. Any views of feedback much appreciated