Trustees
- Summary
- Notifying the Tax Office
- Paying Income Tax
- Paying Capital Gains Tax
- Paying Discretionary Trust Tax
Summary
In summary this is what you should do about tax - and when you should do it
| What you should do | When |
|---|---|
| Ensure that the deceased's tax office knows about the trust | As soon as you take over the trust property |
| Make sure that tax is paid on any income or capital gains arising during the period when the trust is being administered | During the lifetime of the trust |
| Pay any Capital Gains Tax arising on the appointment of trust assets to the beneficiaries | By the appropriate dates |
If there is a Discretionary Trust, pay Discretionary Trust Tax as follows:
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|
Notifying the Tax Office
On taking over from the personal representative assets of which you were appointed trustee by the deceased's will, you should inform the deceased's tax office about the trust in case the personal representative has not already done so.
Paying Income Tax
The income generated by assets left by the deceased on trust is liable to Income Tax at the standard rate. Beneficiaries are taxed on income which is passed on to them and are entitled to a credit for the Income Tax paid by the Trust in respect of this income. Where income is not distributed by the trustees within 18 months of the end of the year of assessment there is a surcharge at the rate of 20% on this income
Paying Capital Gains Tax
No Capital Gains Tax arises when assets left by the deceased on trust are handed over by the personal representative to the trustees. However, a subsequent sale of these assets by the trustees or their appointment to a beneficiary may give rise to a Capital Gains Tax liability. The tax is calculated by reference to the increase in the value of the asset between the date of death and the date of sale or appointment.
Paying Discretionary Trust Tax
When the trust is a discretionary trust, i.e. where there is no immediate benefit under the trust, the trust assets are subject to the following Discretionary Trust Tax charges during the lifetime of the trust:
- an immediate once-off 6% charge,
- an annual 1% charge arising on 31 December* in each year (to be paid by the following 31 March). (* Other than the 31 December occurring in the twelve months immediately following the date on which the 6% charge arose.)
However, where the deceased left young children as prospective beneficiaries of the trust, the 6% and 1% charges will not arise during the lifetime of the trust while the youngest of these children remains under the age of 21.
There are a number of exemptions from the Discretionary Trust Tax charges - trusts set up exclusively for persons with certain disabilities are exempt as are trusts set up for charities.
Self-Assessment returns for the 6% and 1% Discretionary Trust Tax charges must be completed and sent, together with the tax due, to the Tax Office. If this is done within the time-limits specified above no interest will be charged.
July 2011