Trustee tax reporting obligations

Trustees are responsible for making sure that any income or capital gains is declared and tax is paid.

If you’re a trustee and haven’t already received a Trust and Estate Tax Return you must notify HMRC when:

  • a new trust that will receive income or make chargeable capital gains has been set up
  • a trust that hasn’t been receiving income or making chargeable capital gains starts to do so.

Trustees need to keep a record of the trust’s income and expenses. You need these records to complete the Trust and Estate Tax Return.

If you receive a tax return or a notice to file a return from HMRC, you have to either fill in a return and send it back, or submit a return online, even if your trust hasn’t received any income or made any gains that year. It’s important to think about whether HMRC really needs to be told about your trust. To avoid having to complete a tax return unnecessarily it’s better to wait until your trust is receiving income or has made any chargeable capital gains.

The Trust and Estate Tax Return is also one of the main ways to notify HMRC about changes and events that affect the status of the trust, such as new assets transferred into it, changes of address of the trustees, or the trust ending.

It’s the trustees’ responsibility to provide the beneficiaries of discretionary payments with a statement when asked, showing how much income they received in a tax year. The statement should also show the tax paid on that income.  This is normally done on a particular form. This form can also be used by trustees to inform interest in possession trust beneficiaries of their entitlement.

If the trust is settlor interested the trustees can use another specific form to notify the settlor of the amount of income to be taxed to the settlor and the amount of tax already paid on behalf of the settlor.

Inheritance tax

For Inheritance Tax purposes trustees are responsible for letting HMRC know when a ‘chargeable event’ occurs with a trust. A chargeable event may include:

  • a trust passing a ten-year anniversary
  • assets being transferred out of a trust

Again, specific forms are used to tell HMRC about a chargeable event and pay any tax due.

RKG Consulting provides tax, immigration and accounting solutions. Our principal adviser is a "Chartered Tax Adviser" and is also an OISC-licensed immigration practitioner. We can provide a seamless service incorporating both tax and immigration solutions. If you have any queries, please feel free to contact us by telephone: +44 207 839 0389
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