Bare or possession trust starts up services: a bare, or possession, trust can be a hugely effective tool to minimise income tax. If you want to establish a bare trust to take advantage of this, then get in touch and let Coddan Formations Agency help you through every single step of the process. A bare trust is simply a trust that lies somewhere between a full trust and outright ownership in practical terms. It can be registered with minimal paperwork and is a relatively simple structure, but it still needs to be organised correctly.
The legal control of a bare or possession trust lies with the trustee, or trustees, but the beneficiary is solely responsible for the tax. The exception to this is when parents use a bare trust to pass funds or assets to a child and the trust generates income of more than £100. In these cases, the parents retain the tax liability.
Placing shares or assets into a bare trust where the beneficiary is not your child has a number of advantages, however, as the income and capital gains are the beneficiary's alone. This allows the child's income up to the annual personal allowance to remain tax free. If shares are placed in a trust for a child, that minor usually has the right to demand the shares be turned over to them at the age of 18, when they can dispose of them as they see fit.
A bare trust esdtablishment can also be a great weapon against inheritance tax, provided you survive for seven years after setting up the trust. Any assets placed into a bare trust are "potentially exempt transfers". If you live for another seven years, they escape inheritance tax and as the assets are not relevant property, there is no 10-year charge either.