NEW IRD GUIDANCE ON THE PROPOSED INCREASE IN TRUSTEE TAX RATE. Ahead of the proposed increase in the trustee tax rate from 33% to 39% on 1 April 2024, IRD have released high level guidance GA 24/01 regarding how it may perceive some taxpayer transactions and structural changes.
The guidance lists several scenarios where, provided there are no additional, artificial/contrived features, the IRD is unlikely to be concerned.
These include:
- A company changing dividend policy.
- A trustee distributing income to a beneficiary with a lower tax rate (subject to further comments below)
- A trustee adopting a company structure and transferring its income-earning assets to the company (except situations covered by RA 18/01 (regarding interposed entities) and RA 21/01 (regarding personal services income)
- A trustee winding up a trust.
- A trustee choosing to invest in a PIE.
Situations where the IRD may have concerns include:
- Allocating income to lower tax rate beneficiary where amount resettled back on the trust.
- Allocating income to lower tax rate beneficiary by crediting current account where they have no knowledge/expectation of this occurring.
- Creating or increasing income/expenditure that does not reflect the reality of the structure/arrangement.
- Replacing dividend income with loans in an artificial manner
- Artificially altering the timing (bring forward/deferring) of taxable/deductible payments particularly where this is contrary to commercial arrangements.
The guidance is high level only, and so while helpful does not provide the only information required to make a decision. If you have any questions about what you should or shouldn’t be doing before 31 March please get in touch with one of the team.