Defintion of 'quarters' for Discretionary Trust purposes

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Finances / Finanzen » uk.finance » Defintion of 'quarters' for Discretionary Trust purposes

Defintion of 'quarters' for Discretionary Trust purposes [message #386889]

So, 14 Mai 2006 12:51

Neil

Hi,

I posted this on uk.business.accountancy, but thought I would run it
through you guys as well.

I've just been going over the new rules for certain trusts (those that
now face the same treatment as Discretionary Trusts), and many of the
exit charges are calculated on number of quarters.

I need to program some calculations, and this got me thinking - what
exactly is a quarter ?

For tax purposes, I assume it is a period of 3 whole months ?

I ask, because another way to work out a quarter is to divide the
number of days (or seconds) in a year by four, in order to calculate a
mathematically precise figure. However, I suspect this is not correct,
as it would always be the same figure, and give rise to errors.

i.e. Assume commencement date of Trust is 1 February.

Quarter 1: 1 Feb - 30 April - 89 days
Quarter 2: 1 May - 31 July - 92 days

If, as I assume, the 3 month method is the one to use, then is the
above system correct - i.e. the quarter would be 1 Feb - 30 April, not
1 Feb - 1 May (as 1 May would be the start of a new quarter).

OK, this may seem a bit anal, but I do need to be very correct on this
one...

Thanks
Neil.

Re: Defintion of 'quarters' for Discretionary Trust purposes [message #386900 ]

So, 14 Mai 2006 14:21

Ronald Raygun

neil [at] invidion.co.uk wrote:

> I need to program some calculations, and this got me thinking - what
> exactly is a quarter ?

A quarter is the interval which begins on a Quarter Day and ends the
day before the next Quarter Day.

The traditional Quarter Days are Lady Day (25th March), Midsummer
(24th June), Michaelmas (29th September) and Christmas, except in
Scotland where they are Candlemas (2nd February), Whitsun (15th May),
Lammas (1st August), and Martinmas (11th November).

Perhaps your trust can utilise these quarters. Even if it doesn't
actually begin on a "proper" Quarter Day, it could start life with
an incomplete quarter, taxed pro-rata, and use traditional quarters
thereafter.

I presume you would expect to pay a quarter of the annual tax (or deduct
a quarter of the annual tax allowance) in each quarter, irrespective of
the number of days the quarter actually contains (much in the same way as
it is customary to charge the same monthly rent each month irrespective
of the number of days in the month).

For programming purposes, then, it doesn't matter how you define your
Quarter Days. A nice touch might be to shift them by 11 days from
the traditional ones, which is why the start of the tax year changed
after 1752 from 25th March to 6th April, so your other three Quarter
Days might be 4th July, 10th October, and 5th January.

Or perhaps you could define your trust's first QD to be its commencement
date, then count back from there to the last traditional QD, to see how
many days late you are. Then make your other three QDs the same number of
days late with respect to the other three TQDs.

Note there was no strong effort made to ensure the traditional quarters
were as nearly as possible the same length, since they last, respectively,
91, 97, 87, and 90 days (the last incresing to 91 in a leap year), or, in
Scotland, 102 or 103, 78, 102, and 83 days.

Re: Defintion of 'quarters' for Discretionary Trust purposes [message #386909 ]

So, 14 Mai 2006 15:58

john boyle

In message <1147603881.161649.274750 [at] j73g2000cwa.googlegroups.com>,
neil [at] invidion.co.uk writes
>Hi,
>
>I posted this on uk.business.accountancy, but thought I would run it
>through you guys as well.
>
>I've just been going over the new rules for certain trusts (those that
>now face the same treatment as Discretionary Trusts), and many of the
>exit charges are calculated on number of quarters.
>
>I need to program some calculations, and this got me thinking - what
>exactly is a quarter ?
>
>For tax purposes, I assume it is a period of 3 whole months ?
>
>I ask, because another way to work out a quarter is to divide the
>number of days (or seconds) in a year by four, in order to calculate a
>mathematically precise figure. However, I suspect this is not correct,
>as it would always be the same figure, and give rise to errors.
>
>i.e. Assume commencement date of Trust is 1 February.
>
>Quarter 1: 1 Feb - 30 April - 89 days
>Quarter 2: 1 May - 31 July - 92 days
>
>If, as I assume, the 3 month method is the one to use, then is the
>above system correct - i.e. the quarter would be 1 Feb - 30 April, not
>1 Feb - 1 May (as 1 May would be the start of a new quarter).
>
>OK, this may seem a bit anal, but I do need to be very correct on this
>one...

As I understand it, the 'quarter' starts on the day of the settlement
and lasts until the day before same date in the third month unless that
date does not occur in the next moth in which case it is the last day of
the third month. At this minute, I cant find the reference, My book
indicates its the IHTA 1984 s65 .
--
John Boyle

Re: Defintion of 'quarters' for Discretionary Trust purposes [message #386948 ]

So, 14 Mai 2006 22:38

alan.frame

Ronald Raygun <no.spam [at] localhost.localdomain> wrote:

> neil [at] invidion.co.uk wrote:
>
> > I need to program some calculations, and this got me thinking - what
> > exactly is a quarter ?
>
> A quarter is the interval which begins on a Quarter Day and ends the
> day before the next Quarter Day.
>
> The traditional Quarter Days are Lady Day (25th March), Midsummer
> (24th June), Michaelmas (29th September) and Christmas, except in
> Scotland where they are Candlemas (2nd February), Whitsun (15th May),
> Lammas (1st August), and Martinmas (11th November).
[]

Ah yes, only the medical faculty have a Lammas term ;-)

> For programming purposes, then, it doesn't matter how you define your
> Quarter Days. A nice touch might be to shift them by 11 days from
> the traditional ones, which is why the start of the tax year changed
> after 1752 from 25th March to 6th April, so your other three Quarter
> Days might be 4th July, 10th October, and 5th January.

Fascinating post, Ronald.

How about Imbolc (February 1), Beltane (May 1), Lughnasadh (August 1) &
Samhain (November 1) ?

rgds, Alan
--
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"Ride to Work, Work to Ride" SI# 7.067 DoD#1930 PGP Key 0xBDED56C5

Re: Defintion of 'quarters' for Discretionary Trust purposes [message #386957 ]

Mo, 15 Mai 2006 10:09

Neil

Having now looked through a tax manual, I get a similar definition to
John's:

"Each period of ten years is divided into 40 quarters so that property
is only charged to IHT for the period that the property is within the
discretionary trust. Inheritance tax will be charged on the value of
the property at the time of the charge, reduced by one-fortieth for
each quarter that the property is outside the discretionary trust (a
quarter being any period of three months)."

Re: Defintion of 'quarters' for Discretionary Trust purposes [message #386971 ]

Mo, 15 Mai 2006 13:00

Ronald Raygun

neil [at] invidion.co.uk wrote:

> Having now looked through a tax manual, I get a similar definition to
> John's:
>
> "Each period of ten years is divided into 40 quarters so that property
> is only charged to IHT for the period that the property is within the
> discretionary trust. Inheritance tax will be charged on the value of
> the property at the time of the charge, reduced by one-fortieth for
> each quarter that the property is outside the discretionary trust (a
> quarter being any period of three months)."

It's all very well to define a quarter in terms of months, but do they
go on and define what they mean by months? Could be that mid-May to
mid-August doesn't count as a quarter because the part-months of May and
August are disregarded and you have only two months (June and July).

This definition also fails to make clear what "each quarter that the
property is outside" means. If a property is inside the trust for part
of a quarter, is it outside or not?

Re: Defintion of 'quarters' for Discretionary Trust purposes [message #386972 ]

Mo, 15 Mai 2006 13:31

john boyle

In message <CbZ9g.69492$wl.47337 [at] text.news.blueyonder.co.uk>, Ronald
Raygun <no.spam [at] localhost.localdomain> writes

>It's all very well to define a quarter in terms of months, but do they
>go on and define what they mean by months? Could be that mid-May to
>mid-August doesn't count as a quarter because the part-months of May and
>August are disregarded and you have only two months (June and July).

No, it states clearly that the 1st quarter starts on the day of the
settlement.
>
>This definition also fails to make clear what "each quarter that the
>property is outside" means. If a property is inside the trust for part
>of a quarter, is it outside or not?
>

Its inside for time its inside and outside for the part its outside.!

Actually it refers to 'whole' quarters.
--
John Boyle

Re: Defintion of 'quarters' for Discretionary Trust purposes [message #390382 ]

Di, 23 Mai 2006 10:20

Peter Saxton

On Sun, 14 May 2006 12:21:10 GMT, Ronald Raygun
<no.spam [at] localhost.localdomain> wrote:

>For programming purposes, then, it doesn't matter how you define your
>Quarter Days. A nice touch might be to shift them by 11 days from
>the traditional ones, which is why the start of the tax year changed
>after 1752 from 25th March to 6th April, so your other three Quarter
>Days might be 4th July, 10th October, and 5th January.
>
12 days!

--
Peter Saxton from London
peter [at] petersaxton.co.uk

Re: Defintion of 'quarters' for Discretionary Trust purposes [message #390385 ]

Di, 23 Mai 2006 11:08

Ronald Raygun

Peter Saxton wrote:

> On Sun, 14 May 2006 12:21:10 GMT, Ronald Raygun
> <no.spam [at] localhost.localdomain> wrote:
>>
>>For programming purposes, then, it doesn't matter how you define your
>>Quarter Days. A nice touch might be to shift them by 11 days from
>>the traditional ones, which is why the start of the tax year changed
>>after 1752 from 25th March to 6th April, so your other three Quarter
>>Days might be 4th July, 10th October, and 5th January.
>
> 12 days!

Ah, bit of a sore point. There seems to be a spot of inconsistency
among historical claims from various sources. You are of course correct
in pointing out that a shift from 25th March to 6th April is by 12 days.

However, since the calendar lost only 11 days between Wednesday 2nd and
Thursday 14th September 1752, only an 11, not 12, day shift can be
justified.

The only explanation which seems to make sense, then, is that the shift
was from 25th March to 5th April, and that would imply that Lady Day
must have been the end, not the start, of the tax year.

Could it have been both, with the boundary at mid-day?

Re: Defintion of 'quarters' for Discretionary Trust purposes [message #390391 ]

Di, 23 Mai 2006 13:47

Tim

> > "Ronald Raygun" wrote:
> >>For programming purposes, then, it doesn't matter how you define
> >>your Quarter Days. A nice touch might be to shift them by 11 days
> >>from the traditional ones, which is why the start of the tax year
> >>changed after 1752 from 25th March to 6th April, so your other three
> >>Quarter Days might be 4th July, 10th October, and 5th January.
> >
> Peter Saxton wrote:
> > 12 days!
>
"Ronald Raygun" wrote
> Ah, bit of a sore point. There seems to be a spot of inconsistency
> among historical claims from various sources. You are of course correct
> in pointing out that a shift from 25th March to 6th April is by 12 days.
>
> However, since the calendar lost only 11 days between
> Wednesday 2nd and Thursday 14th September
> 1752, only an 11, not 12, day shift can be justified.
>
> The only explanation which seems to make sense, then, is that the
> shift was from 25th March to 5th April, and that would imply that
> Lady Day must have been the end, not the start, of the tax year.
>
> Could it have been both, with the boundary at mid-day?

A shift of **eleven-and-a-half** days?

Re: Defintion of 'quarters' for Discretionary Trust purposes [message #390436 ]

Mi, 24 Mai 2006 13:16

David Floyd

In message of Tue, 23 May 2006, Ronald Raygun writes
>Peter Saxton wrote:
>
>> On Sun, 14 May 2006 12:21:10 GMT, Ronald Raygun
>> <no.spam [at] localhost.localdomain> wrote:
>>>
>>>For programming purposes, then, it doesn't matter how you define your
>>>Quarter Days. A nice touch might be to shift them by 11 days from
>>>the traditional ones, which is why the start of the tax year changed
>>>after 1752 from 25th March to 6th April, so your other three Quarter
>>>Days might be 4th July, 10th October, and 5th January.
>>
>> 12 days!
>
>Ah, bit of a sore point. There seems to be a spot of inconsistency
>among historical claims from various sources. You are of course correct
>in pointing out that a shift from 25th March to 6th April is by 12 days.
>
>However, since the calendar lost only 11 days between Wednesday 2nd and
>Thursday 14th September 1752, only an 11, not 12, day shift can be
>justified.
>
>The only explanation which seems to make sense, then, is that the shift
>was from 25th March to 5th April, and that would imply that Lady Day
>must have been the end, not the start, of the tax year.
>
>Could it have been both, with the boundary at mid-day?
>

Would the fact that 1752 was a leap year have any effect?

Re: Defintion of 'quarters' for Discretionary Trust purposes [message #390444 ]

Mi, 24 Mai 2006 15:53

Ronald Raygun

David Floyd wrote:

> In message of Tue, 23 May 2006, Ronald Raygun writes
>>
>>Ah, bit of a sore point. There seems to be a spot of inconsistency
>>among historical claims from various sources. You are of course correct
>>in pointing out that a shift from 25th March to 6th April is by 12 days.
>>
>>However, since the calendar lost only 11 days between Wednesday 2nd and
>>Thursday 14th September 1752, only an 11, not 12, day shift can be
>>justified.
>>
>>The only explanation which seems to make sense, then, is that the shift
>>was from 25th March to 5th April, and that would imply that Lady Day
>>must have been the end, not the start, of the tax year.
>>
>>Could it have been both, with the boundary at mid-day?
>
> Would the fact that 1752 was a leap year have any effect?

Depends.

No, because Saturday 29th Feb 1752 would have been part of the 1751/52
tax year. It is the 1752/53 tax year which suffered the "loss" of 11
days between 2nd and 14th September. Accordingly Lady Day Sunday 25th
March 1753 came 11 days earlier than it would have done if the calendar
had not been adjusted.

Mind you, some sources suggest that in those days it was the custom to
change the year number on Lady Day instead of on 1st January.

That is, the day after 31st December 1750 would have been 1st January
1750 and the day after 24th March 1750 would have been 25th March 1751.

I'm not sure that's true, but if it is, *and* if it is the case that
*even in that scheme* the leap days occurred in those years *notated*
as numbers divisible by 4, then there would have been a leap day in the
February of what we now call 1753, but not in what we now call 1752.

That might help to explain a 12 day shift, since in addition to the 11
days lost from September 1752, we also lost the leap day in the *following*
February (which would have been part of old-style-1752 (and therefore a leap
year) but which would thenceforth be referred to as part of new-style-1753
(and therefore not a leap year)). That would mean that "the year 1752" had
only 282 days (from 25th March to 31st December).

But it would mean the authors of the Unix "cal" program botched up their
research, since its (effectively hand-crafted) output for 1752 clearly
shows September 1752 as having 19 days and the *previous* February 1752
as having 29 days.

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