Navigating the UK Tax Reforms: How AI Can Empower Trust Companies Amid New Compliance Challenges

With the October 2024 Budget, the UK government has introduced several significant tax reforms under the Labour Party’s first budget in 14 years, reshaping tax obligations across inheritance tax (IHT), capital gains tax (CGT), and the non-domicile regime. These changes bring both challenges and opportunities for trust companies managing private clients, especially given the complex adjustments to compliance and tax reporting standards.

AI technologies offer trust companies the precision and agility they need to adapt to these new regulatory demands. Below, we outline the key UK tax measures and detail how specific AI tools can transform trust management, compliance, and client service in light of these new tax obligations.

Summary of Key UK Tax Measures Impacting Trust Companies

• Non-Dom Regime Changes:
  The non-dom regime will be replaced by a new four-year Foreign Income and Gains (FIG) system effective from April 2025. Under this regime, qualifying individuals can exempt certain foreign income from UK taxes for four years if they have not resided in the UK for the past 10 years.

• Inheritance Tax (IHT) for Long-Term Residents:
  Domicile as a factor for IHT will be replaced by a 10-year UK residency threshold. Once a client meets this criterion, they will be subject to IHT on worldwide assets if they remain UK residents beyond nine years.

• Inheritance Tax on Pension Funds:
  From April 2027, unused pension funds will be subject to IHT upon the contributor’s death, changing the landscape of pension planning for many clients.

• VAT on Private School Fees:
  Beginning January 2025, private school fees will incur a VAT charge, creating new tax reporting needs for educational trusts and private family funds covering these expenses.

• Capital Gains Tax (CGT) Adjustments:
  CGT rates have been increased to 18% and 24% for basic and higher rates, respectively. There are also changes to tax reliefs such as Business Asset Disposal Relief (BADR) and Investors’ Relief, increasing tax rates on certain business assets from 10% to 14% in April 2025, and then to 18% in April 2026.

• Temporary Repatriation Facility (TRF):
  For non-dom taxpayers, the TRF will allow certain funds to be repatriated at reduced tax rates, set at 12% for 2025-27 and 15% in 2028.

• Increased National Insurance (NI) for Employers:
  Employers will face an increase in NI contributions from 13.8% to 15%, beginning April 2025, as well as a lower contribution threshold at £5,000.

How AI Can Support Trust Companies in Managing UK Tax Reforms

The 2024 budget introduces multiple compliance challenges and new administrative burdens for trust companies. AI offers efficient, scalable solutions for adapting to these reforms while enhancing accuracy and client satisfaction. Firms like Deloitte and Accenture offer AI-driven solutions to enhance tax compliance and operational efficiency.

These tools provide support for tax-related compliance, helping organizations manage complex scenarios through automation, real-time updates, and integration with relevant financial data. However, while they offer significant value for general compliance and reporting, their specific applicability to trust-related tax issues—such as the recent changes in inheritance tax (IHT), capital gains tax (CGT), and national insurance (NI) for trusts—may require further customization.

Thomson Reuters ONESOURCE equips trustees with automated compliance tools, multi-jurisdictional support, real-time monitoring, and audit-ready reporting, allowing them to manage complex tax requirements and optimize workflow efficiency under the UK’s new tax framework.

AI-driven governance platforms like Accenture’s Responsible AI or OneTrust's AI Governance solution can assist in inventorying, assessing, and monitoring AI-related risks, ensuring adherence to evolving tax regulations. These platforms excel in maintaining regulatory adherence across complex, evolving requirements, automate the tracking of client tax statuses and cross-border obligations, offering trustees real-time updates and risk management insights that help avoid compliance breaches.

DataRobot's platform integrates predictive analytics with compliance monitoring, offering trustees tools to anticipate and manage compliance risks associated with clients' international income and residency changes. Its machine learning models automate compliance tracking, generate real-time risk alerts, and provide predictive insights into how income and residency shifts may affect tax obligations. By delivering continuous updates on tax liabilities, DataRobot helps trustees minimize the risk of non-compliance.

The C3 AI Residential Property Appraisal solution empowers trustees under the UK’s 2024 tax reforms by providing a unified, AI-driven platform that enhances property valuation accuracy, workflow efficiency, and compliance. Utilizing multiple valuation methods and integrating data from diverse sources, it delivers a comprehensive view of property assets, aligned with industry standards and regulatory requirements. With features like automated compliance reporting, triaged appraisals, and continuous AI model optimization, trustees can streamline complex property appraisals, improve tax collection rates, and ensure defensible, transparent valuations—all within an efficient, AI-assisted workflow.

Trust companies considering these tools may find that, while they deliver essential compliance functionalities, they often work best when supplemented by trust-specific expertise. Tailoring these tools to fit new UK trust tax requirements—especially given the complexity of IHT and CGT—can help ensure that trust companies fully meet regulatory needs while benefiting from the efficiency and accuracy that AI provides.

The UK's 2024 tax reforms may be complex, but with the right technology, your firm will have the tools to provide unparalleled client service, strengthening relationships in a landscape of change.

Discover how Fiduc-IA Corp’s tailored services can help you to master this new era in tax regulation, transforming obstacles into lasting advantages.

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