Trusts An introduction
Contents
- Introduction
- Trusts. What they are and how they are created
- The different sorts of trusts
- How trusts are taxed
- Self Assessment
- Appendix
- Contacts
This is a short guide to trusts and how they are taxed.
It provides general
information for
- the settlor who creates a trust
- the trustee looking after the trust, and
- the beneficiary who will benefit from the trust.
We explain the basic types of private family trust, but not special trusts or those where some or all of the trustees are not resident in the United Kingdom. If you need more detailed information, you should seek professional help from an accountant or solicitor.
Our specialist offices within Inland Revenue Trusts can also provide further information about the taxation of trusts.
This only deals with income tax and capital gains tax. Trusts
might also be charged inheritance tax, which is covered
in our IHT series of booklets, see the inside front
cover for details. Inland Revenue Capital
Taxes can provide more information about inheritance
tax and trusts.
Trusts. What they are and how they are created
A trust is an obligation binding a person (which can be an individual or a company) called a 'trustee' to deal with 'property' in a particular way, for the benefit of one or more 'beneficiaries'.
What is a 'trustee'?
Trustees are the legal owners of the trust property. They are legally bound to look after the property of the trust in a particular way and for a particular purpose. Trustees administer the trust and in certain circumstances make decisions about how the property in the trust is to be used.
The trust can continue even though the trustees might change, but there must normally be at least one trustee.
What is 'property'?
The property of a trust can include
- money
- investments
- land or buildings
- other assets, such as paintings.
The cash and investments held in the trust are also called the 'capital' or 'fund' of the trust. This capital (or fund) may produce income, such as interest or dividends. The land and buildings may produce rental income. The way income is taxed depends on the type of trust.
What is a 'beneficiary'?
A beneficiary is anyone who benefits from the property held in the trust. There can be one or more beneficiaries, such as a whole family or a class of people, and each may benefit from the trust in a different way.
For example, a beneficiary may benefit from
- the income only, or
- the capital only, or
- both the income and capital of the trust.
What is a 'settlor'
A settlor is a person who has put property into the trust. Property is normally put into the trust when it is created, but it can also be added at a later date.
Is a settlement the same as a trust?
The words 'settlement' and 'trust' are sometimes used in place of each
other, and to describe the same thing. For tax purposes,
the term 'settlement' can have a wider meaning and can
include various other arrangements or agreements. This
only deals with trusts, and settlements that are trusts.
Normally a trust is created by a deed. A settlor might ask a professional adviser to draw up a trust deed, which then sets out the terms of the trust.
A trust can be created under the terms of a will, when someone leaves instructions that when he or she dies some or all of the estate is to be placed in trust. A trust can also occur if a person dies without leaving a will.
Sometimes the Courts will create a trust, for example, when deciding how to deal with property for the benefit of a child or an incapacitated person who cannot manage his or her own affairs.
I am a settlor. What do I have to do when a trust is created?
Trust law and the taxation of trusts can be complicated. If you want to create a trust you should seek professional advice from a solicitor. He or she can draw up the trust deed for you, and give advice on other legal matters relating to trusts.
You should tell your Inland Revenue Office if you have put property into a trust.
I am a trustee. What do I have to do when a trust is created?
If you expect the trust to be liable to tax on income or gains, you should inform us as soon as the trust is created. You can do this by completing an Inland Revenue form Inland Revenue form 41G(Trust) (PDF18K) which is available from any Inland Revenue Enquiry Centre or Tax Office. Send the completed form to the Inland Revenue Trusts office that deals with your area.
Please do not send a copy of the trust deed. The Inland Revenue Trusts office will ask for it if they need to see it.
What are my responsibilities as a trustee?
Your responsibilities depend on the type of trust and the terms under which the trust is created. The settlor may have given instructions that trustees carry out various functions, and trust law may impose further obligations.
For taxation purposes you are responsible for
- notifying the Inland Revenue that tax is due, within six months of the end of the tax year for which it is due, where you have not received a tax return for the year
- keeping records of the income and capital gains of the trust
- completing and sending back any tax return issued to you
- paying any tax due on the income or capital gains of the trust
- supplying certificates or vouchers to the beneficiaries to show how much income they have received from the trust in the tax year and how much tax the trustees have deducted. (Inland Revenue Trusts can supply forms for you to use.)
More information on tax returns and payment of tax
Depending on the terms of the trust deed, you can appoint a professional adviser, such as a solicitor or accountant, to carry out some or all of these tasks. However, if you do, you are still responsible for ensuring that all tax obligations are carried out satisfactorily.
What do I have to do when a trust ceases to exist?
As trustee, if a trust is wound up you should notify your Inland Revenue Trusts office and complete a tax return for the period up to the date the trust is wound up.
Remember, you will need to
- make provision for any tax that may be due
- consider whether the ending of the trust gives rise to a capital gains tax liability.
If the property of the trust is distributed before any outstanding tax is paid then you might have to pay that tax out of your own pocket.
There are a number of different sorts of trusts, but usually they fall into one of the following categories
- bare trusts
- interest in possession trusts
- discretionary trusts
- accumulation and maintenance trusts
- mixed trusts.
For tax purposes, there are also settlor-interested trusts and non-resident trusts and special trusts.
A bare trust, also known as a 'simple trust', is one in which each beneficiary has an immediate and absolute right to both capital and income. The beneficiaries of a bare trust have the right to take actual possession of trust property.
The property is held in the name of a trustee, but that trustee has no discretion over what income to pay the beneficiary. In effect, the trustee is a nominee in whose name the property is held and has no active duties to perform.
|
Example This is a bare trust because Juliet is absolutely entitled to both the capital (the original money settled in the trust) and the income (any interest earned). |
What is an 'interest in possession trust'?
This type of trust exists when a beneficiary, known in this case as an 'income beneficiary', has a current legal right to the income from the trust as it arises. The trustees must pass all of the income received, less any trustees' expenses and tax, to the beneficiary.
A beneficiary who is entitled to the income of the trust for life is known as a 'life tenant' (a 'liferenter' in Scotland) or as having a 'life interest' (a 'liferent interest' in Scotland).
The income beneficiary need not, and often does not, have any rights over the capital of such a trust. Normally, the capital will pass to a different beneficiary, or beneficiaries, at a specific time in the future or after a specific future event. Depending on the terms of the trust, the trustees might have the power to pay capital to a beneficiary even though that beneficiary only has a right to receive income.
A beneficiary who is entitled to the trust capital is known as the 'remainderman' ('fiar' in Scotland) or the 'capital beneficiary'.
|
Example Kathleen has an 'interest in possession' in the trust as she is entitled to the income (the dividends) arising on it for the rest of her life. Unlike Juliet in the bare trust example, Kathleen has no right to the capital, so when she dies the trust ceases and all the capital (the shares) passes to her children or grandchildren (the remaindermen or fiars). |
What is a 'discretionary trust'?
Trustees of a discretionary trust generally have 'discretion' about how to use the income of the trust. They may be required to use any income for the benefit of particular beneficiaries, but the trustees can decide
- how much is paid
- to which beneficiary or class of beneficiaries payments are made
- how often the payments are made
- what, if any, conditions to impose on the recipients.
The trustees may, or may not, be allowed to 'accumulate' income within the trust for as long as the law allows rather than pass it to the beneficiaries. Income that has been accumulated becomes part of the capital of the trust.
|
Example The trustees can decide how to invest or use the money and any interest it earns to benefit the grandchildren. So, when the children are young, the trustees might decide to pay for piano lessons for them. As they get older, the trustees might pay towards a wedding. After 20 years, the trustees wind up the trust and distribute all of the money to Azra and Jaspal. |
What is an 'accumulation and maintenance trust'?
An accumulation and maintenance trust is one in which the beneficiaries will become entitled to the property or at least the income when they reach a certain age (no more than 25). The trustees can use the income for the maintenance of the beneficiary before the date on which that beneficiary becomes entitled to the property or to an interest in possession in that property.
Trustees of an accumulation and maintenance trust are given power to 'accumulate' the income of the trust until a certain date, at which time the beneficiary, or beneficiaries, are entitled to the property of the trust or to the income arising from that property.
In England and Wales, the beneficiary (unless the terms of the trust say otherwise) becomes entitled to the income from the property held in the trust when he or she reaches age 18 and an interest in possession trust is created at that point.
The position in Scotland is different, as there is no equivalent entitlement to the income of the trust at age 18. However, Scots law limits accumulation periods so accumulation and maintenance trusts will often end when the beneficiaries reach the age of majority.
|
Example The trustees can make payments to Andrew from the trust for his maintenance and will accumulate any remaining income. The terms of the trust give Andrew the capital and any accumulated income at the age of 25. So on his 25th birthday Andrew is entitled to all the money at that date. |
A mixed trust is a mixture of more than one type of trust, for example
- an interest in possession trust and a discretionary trust, or
- an interest in possession trust and an accumulation and maintenance trust.
|
Example The part of the trust benefiting Zoe becomes an interest in possession trust while the part that benefits Sarah remains an accumulation and maintenance trust until she reaches 18. So, when Zoe reaches 18 the trust becomes a mixed trust. |
What is a 'settlor-interested trust'?
There are special tax rules for trusts in which the settlor 'retains an interest' in the trust, for example where the settlor receives income from the trust, but these are too specialised to be included in this. Your professional adviser should be able to provide you with more information about them.
Helpsheets HS270 Trust and settlements - Income treated as the settlor's and HS294 Trusts and Capital Gains Tax contain more information.
What about 'non-resident trusts' and 'special trusts'?
The rules for these trusts are too specialised to be included in this, again your professional adviser should be able to provide you with more information about them. Examples include
- trusts where some or all of the trustees are not UK residents
- trusts that are not created or not administered under UK law
- various special types of UK trust such as charities, pension funds, unit trusts and trusts for employee share schemes.
The Centre for
Non-Residents can provide information
about the tax
treatment of non-UK
resident trusts
and foreign law
trusts.
This section explains briefly how different types of trusts are charged to income tax and capital gains tax. Inheritance tax is covered in the IHT series of booklets.
Different tax rules apply to settlor interested trusts, non-resident trusts and special trusts, and are not covered in this guide.
Depending on the type of trust, when income and capital gains arise in a trust tax might be charged on
- the trustees
- the beneficiaries
- the settlor
How is a bare trust taxed?
Bare trusts are treated for tax purposes as if the beneficiary holds the trust property in his or her own name. Income tax and capital gains tax are charged on the beneficiary, as if the trust did not exist.
The beneficiary must declare any income and capital gains on his or her personal tax return. Although trustees can pay income tax on behalf of a beneficiary, it is the beneficiary who is chargeable to tax.
How is an interest in possession trust charged to income tax?
The trustees are normally chargeable to income tax on income received, so
- rent and trading income are chargeable at the basic rate (currently 22%)
- UK dividend income is chargeable at the starting rate for dividends (currently 10%) and the tax credit attached to the net dividend meets the trustees' liability
- savings income, such as bank interest, is chargeable on the trustees at the lower rate (currently 20%) Such income usually has tax deducted at source by the bank or building society, and this is taken into account in taxing the trustees.
The beneficiaries are entitled to the income from the trust after tax and expenses, and are taxed on this in the normal way. They are entitled to credit for tax paid by the trustees or deducted at source.
If beneficiaries are starting rate taxpayers or non-taxpayers they will be able to reclaim some or all of the tax paid, though tax credits on dividends cannot be paid. If they are liable at higher rates, further tax will be due.
Trusts and capital gains describes how capital gains are taxed.
How is a discretionary trust charged to income tax?
The trustees are liable to tax on income received at the rate applicable to trusts (currently 40%), but dividends and other similar income are chargeable at the trust rate that applies to dividends (currently 32.5%).
All income paid to the beneficiaries carries a credit at the rate applicable to trusts. So, the payment is treated as if it had been made after the deduction of tax at that rate. If beneficiaries are basic or starting rate taxpayers, or non-taxpayers, they will be able to reclaim some or all of the tax paid. If they are liable at higher rates, further tax will be due.
If the trustees also have power to accumulate income, they can choose to do so and that income becomes additional capital of the trust. If, in later years, the trustees distribute some of the accumulated income to the beneficiaries the payment is a capital distribution, and not an income distribution. Beneficiaries are not taxable on capital distributions.
When trustees of a discretionary or accumulation and maintenance trust pay income to beneficiaries they have to ensure that they have paid enough tax to cover the tax credit at the rate applicable to trusts. Trustees, therefore, need to keep a record of tax payments, known as the 'tax pool'.
The tax pool consists of tax paid by the trustees on income they have received, and tax deducted at source, for example by banks or building societies on interest. It does not include non-payable tax credits, such as the tax credit on dividends. When the trustees pay income to beneficiaries the tax pool is reduced by the tax credit on that income.
If the tax in the tax pool is not enough to cover the tax credit needed for the payment to beneficiaries the trustees must pay the difference in their Self Assessment tax return for the year.
|
Example The opening balance in the tax pool is nil so the trustees must pay tax of £40 to cover this credit. If there were a balance brought forward but that balance was less than £40, the trustees would have to pay enough tax in the year to make up the shortfall. |
| Example (Using a rate applicable to trusts of 40% and a trust rate for dividends of 32.5%.) Mike, a trustee, receives a net dividend of £90 (tax credit £10). He is chargeable at 32.5%, which is partly covered by the 10% non-payable tax credit. |
|||
| Dividend received | £90 | £90 | |
| Plus non-payable tax credit | £10 | ||
| Income | £100 | ||
| Tax at 32.5% | £32.50 | £32.50 | |
| Less non-payable tax credit | £10 | ||
| Tax payable by trustee | £22.50 | £22.50 | |
| Net income after tax | £67.50 | £67.50 | |
|
Mike now has net income of £67.50 (net dividend of £90 less tax paid of £22.50). Only £22.50 goes into the tax pool because the £10 dividend tax credit is not payable. If Mike pays the net income of £67.50 to the beneficiary, the tax credit of 40% on that net payment is £45 (gross amount of £112.50 at 40%). But if the tax pool has nothing brought forward from the previous year and there is no other income on which tax has been paid, the tax pool of £22.50 will not cover the tax credit of £45 on the payment made. Mike will have to calculate the maximum amount he can pay in these circumstances. |
|||
| Net income after tax | £67.50 | ||
| Add tax in tax pool | £22.50 | ||
| Total amount to cover payment to beneficiary and tax credit at 40% | £90 | ||
| Tax Credit at 40% | £36 | £36 | |
| Less tax paid in tax pool | £22.50 | ||
| Additional tax to pay by trustee | £13.50 | ||
| Net payment to beneficiary | £54 | ||
|
The beneficiary is paid net income of £54 with a tax credit of £36, which is equivalent to gross income of £90 with tax credit at 40%. Mike pays a total of £36 tax to the Inland Revenue, £22.50 tax on the dividend received and the additional £13.50. So if the trustee is relying on the dividend income to fund both the payment to the beneficiary and the additional tax he has sufficient funds to release only 60% of the actual dividend, that is £90 x 60% = £54. |
|||
Trusts and capital gains describes how capital gains are taxed.
How is an accumulation and maintenance trust taxed?
In the period during which the trustees can accumulate income, the trustees and beneficiaries are taxed in the same way as in a discretionary trust, as described above.
When the accumulation period ends, the tax treatment depends on what happens to the trust property. For example, if
- an interest in possession trust is formed, then the tax treatment for trustees and beneficiaries of interest in possession trusts will apply
- it becomes a discretionary trust, then the tax treatment for trustees and beneficiaries of discretionary trusts will apply
- the trust comes to an end, and the trustees pass the trust property to the beneficiaries, the trustees may have to pay capital gains tax on any gain arising at that point, but will not have any liability on future income or gains.
How is a mixed trust charged to income tax?
For both trustees and beneficiaries, in a mixed trust the income for each part of the trust will be taxed under the rules for that type of trust. For example, the part of the trust in which there is an interest in possession will be taxed as such, while the discretionary part will be taxed as a discretionary trust.
Trustees are liable to tax, at the rate applicable to trusts, on any capital gains above an annual exempt amount arising for
- interest in possession trusts
- discretionary trusts
- accumulation and maintenance trusts, and
- mixed trusts.
The beneficiaries are not taxed on any trust gains and do not get credit for tax paid by the trustees.
The annual exempt amount is normally equal to half the annual exempt amount for an individual. Trustees of trusts for the benefit of people who are mentally handicapped or in receipt of certain specified allowances may be entitled to the whole annual exempt amount for an individual.
Where there is more than one trust made by the same settlor, the annual exempt amount is reduced proportionally on the basis of the number of settlements made since 6 June 1978 and still in existence.
Helpsheet HS294 'Trusts and Capital Gains Tax' explains the rules about the annual exempt amount further.
Self Assessment is the method for calculating and paying tax. If you are a trustee (except a trustee of a bare trust) you are responsible for completing and sending back a tax return for trust income and gains and paying the tax on time. Failure to do so may result in automatic interest, surcharges and penalties.
I am a trustee. When will I receive a Self Assessment tax return?
Self Assessment tax returns are generally issued each year in April, and ask for details of income and capital gains for the tax year ended on 5 April. You must complete and send us the Trust and Estate tax return
- by 30 September, if you want us to calculate the tax due, or
- by 31 January in the following year if you intend calculating your own liability.
If we get your tax return after 30 September, we cannot guarantee to let you know how much you owe in time for you to pay by 31 January. This means that you have to estimate how much to pay. If you pay too little, you will have to pay interest and possibly a surcharge.
When do I have to pay any tax due?
As trustee, you may need to pay the tax due for any one year in three instalments
- a payment on account on 31 January in the tax year
- another payment on account on 31 July after the end of the tax year, and
- a final payment on the following 31 January, if there is any more due.
The first and
second payments
on account are
usually equal
to half of the
total liability
for the previous
year (excluding
capital gains
tax), while the
final payment
is a balancing
payment.
| Example If, as trustee, your total income tax liability for 2003-04 is £5,000, and the total liability for 2004-05 is £6,000, the payments due and timetable for the tax return for 2004-05 are |
|
| 31 January 2005 | £2,500 due (half of £5,000) |
| April 2005 | tax return for 2004/05 issued |
| 31 July 2005 | £2,500 due (half of £5,000) |
| 30 September 2005 | Tax return due if we are to calculate the tax |
| 31 January 2006 | £1,000 due (£6,000 due for 2004/05 less the £5,000 paid). Tax return due if trustees calculate the tax due. |
| There is also a payment due on 31 January 2006 of £3,000. This represents the first payment on account for 2005-06, which is half of the total liability for 2004-05. | |
Payments on account are not due when the income tax liability for the previous year is below £500 or if 80% or more of the tax liability is collected by deduction of tax at source.
If you need further information about tax returns, assessments and payments please contact the appropriate Inland Revenue Trusts office.
I am not the only trustee. Are we all liable to pay tax due?
All trustees of an individual trust are jointly liable for any tax due, not just a share of it. However, where there is more than one trustee acting you normally arrange for one person, known as the 'principal acting trustee', to deal with the Inland Revenue on your behalf.
The actions of the principal acting trustee are treated as actions of all of the trustees, so
- if he or she deals with everything properly, all of you will be treated as fulfilling your tax obligations
- if he or she fails to fulfil the tax obligations, then you are all treated as failing to meet those obligations.
We can recover any tax or interest on tax from any trustee if the principal acting trustee does not pay. Any trustee can be held liable for penalties or surcharges incurred during the period he or she was a trustee.
There is further information on Self Assessment in our SA series of leaflets.
Appendix
What advice we can and cannot give
Introduction
IR Trusts is responsible for the taxation of
- UK resident trustees
- trust income received by beneficiaries
- personal representatives of the estates of deceased individuals
- income received by beneficiaries of estates.
IR Trusts is also responsible for the following tax law.
- ICTA 1988 Part XV - the anti-avoidance Settlements legislation
- ICTA 1988 Part XVI - deceased estates during the administration period
- ICTA 1988 S282A and S282B - jointly held property.
This appendix explains the ways in which IR Trusts can provide information and advice to help our customers, and sets out the circumstances where we cannot help.
What we can do
Advice from our staff
We can provide advice on your general tax rights and obligations. We may also provide more specific advice in limited circumstances.
Advice from our staff - general
Apart from this guide, we produce the Trusts, Settlements & Estates Manual (TSEM). It contains guidance on the characteristics and tax treatment of the various kinds of trusts. For instance, there is guidance on what constitutes a bare trust, with examples. The manual is available to the public in accordance with the Government’s ‘Code of Practice on Access to Government Information’.
In addition, we provide guidance notes and helpsheets in the Trust and Estate tax return and guidance notes with the Trusts pages of the individual tax return.
If you want to know about how we apply the Settlements legislation, TSEM Chapter 4 and Helpsheet HS270 provide detailed guidance.
If you cannot find what you need to know in this guide, the TSEM, or the tax return guidance, you can contact any IR Trusts office.
We normally advise only on general tax matters about Self Assessment for trusts, settlements and estates. We can
- explain your rights and obligations about tax as a trustee or personal representative
- provide information to help you complete the Trust and Estate tax return
- provide information to help individuals complete the Trusts pages of the individual tax return
- advise you about appropriate forms and helpsheets, and how to obtain them.
You can contact Inland Revenue Trusts by phone, in writing or in person.
Open Government requests
We will generally meet requests for information on our interpretation of tax law where we have a settled view on the matter and disclosure of the information will not assist tax avoidance or evasion. You will normally have to pay the cost of any extra work we have to do to handle your request. For further details see IR141 ‘Open Government’.
Advice from our staff - specific
In limited circumstances, we may also provide specific advice about our interpretation of tax law and about transactions that have already taken place.
Interpretation of tax law
If you are genuinely uncertain about the Inland Revenue’s interpretation of the law and its application to a transaction you are considering, we can offer advice in certain limited circumstances. See Code of Practice 10, section 4 for full details.
We can give advice only if
- the question relates to legislation dealt with by IR Trusts that was introduced in the last four Finance Acts, or
- you have a query about the Statements of Practice or Extra-Statutory Concessions for which IR Trusts has responsibility.
Please note that we cannot in any circumstances give pre-transaction advice about trust deeds or whether the Settlements legislation applies.
IR Trusts Statements of Practice and Extra-Statutory Concessions
Our Statements of Practice are
- SP1/82 - The interaction of Income Tax and Inheritance Tax on assets put into settlements
- SP3/86 - Payments to a non-resident from UK discretionary trusts or UK estates during the administration period: Double taxation relief
- SP4/93 - Deceased persons' estates: Discretionary interests in residue
- SP4/94 - Enhanced stock dividends received by trustees of interest in possession trusts.
Our Extra-Statutory Concessions are
- ESC A14 - Deceased person’s estate: residuary income received during the administration period
- ESC A68 - Payments out of a discretionary trust which are taxable as Employment Income.
Post-transaction rulings generally
In
limited
circumstances,
we
may
give
rulings
before
you
complete
your
tax
return
on
transactions
that
have
already
taken
place.
See
Code
of
Practice
10,
section
3
for
full
details
of
how
to
ask
for
a
ruling.
Please
note
that
we
cannot
in
any
circumstances
give
post-transaction
rulings
about
trust
deeds
or
whether
the
Settlements
legislation
applies.
Post-transaction valuation checks for capital gains tax
If you need to value assets to calculate your liability to capital gains tax, we offer a free service to help you complete your tax return. You can ask us to check a valuation after you have made the disposal but before you send us your tax return. This service is available to all trustees and personal representatives.
You can get further information about this service from your local Inland Revenue office or on our trusts pages.
Exceptional circumstances
In exceptional circumstances, you can also ask for our interpretation of the law when the transaction in question involves matters that are of major public interest. We will consider such requests on an individual basis.
How you should ask for information and guidance on our interpretation of tax law
You should normally make your request in writing to the IR Trusts office dealing with your affairs. The exception is requests about jointly held property, when you should write to Inland Revenue Trusts, Director’s Office, Bootle.
What we cannot do
We cannot give rulings or advice about
- the tax consequences of executing non-charitable trust deeds or settlements
- whether, in particular circumstances, the Settlements legislation in Part XV ICTA 1988 applies.
The tax consequences of executing non-charitable trust deeds or settlements
We cannot advise you about the status of the trust for tax or any other purpose, for example whether it is ‘discretionary’ or ‘interest in possession’.
Trustees must complete their own Self Assessment using the Trust and Estate tax return. If we open an enquiry into the trust’s tax return, we may check that the trustees have applied the correct basis of taxation for that type of trust by looking at the trust deed. Otherwise, we do not want to see the deed. This guidance, the TSEM and the tax returns, as described above, should enable trustees and beneficiaries to complete their tax returns correctly. If you are in any doubt about the status of the trust for tax or any other purpose, you should ask the legal adviser who drew up the trust deed.
In particular, we cannot give advice on how you should set up your trust, or the wording of the deed. That would be legal advice, which we are not qualified to provide. Instead, you should consult your own legal adviser.
We cannot comment on
- trustees’actions or proposed actions (the exception is set out at ‘Interpretation of tax law’)
- general trust law issues
- a trust deed except as part of a Self Assessment enquiry.
Whether, in particular circumstances, the Settlements legislation in Part XV ICTA 1988 applies
The Settlements legislation applies to individuals. Its purpose is to prevent avoidance of tax by individuals transferring income to someone else with a lower tax rate. Individuals should be aware of the tax consequences of entering certain arrangements. The guidance in the TSEM and Helpsheet IR270, as described above, should enable individuals to complete their tax returns correctly. We cannot give advice on specific cases. But we may enquire into an individual’s tax return if we think a settlement is caught by the legislation.
Tax avoidance
We cannot give rulings or advice on any transaction that, in our view, constitutes tax avoidance. Tax avoidance is any action taken to obtain a tax advantage in a way that Parliament did not intend or would not have intended had the matter been put before it. This definition is based upon the report on tax avoidance produced by the Tax Law Review Committee in 1997.
Resources
We will not provide our interpretation of tax law where doing so would entail an unreasonable or disproportionate diversion of our resources.
Other areas where we do not give advice
In common with other parts of the Inland Revenue, we will not give a ruling or advice
- in response to vexatious or frivolous applications
- in response to applications that do not involve genuine points of doubt or difficulty to you or your adviser
- after an enquiry into your Self Assessment is opened or after the time limit has passed for an officer of the Board to notify you of his or her intention to begin an enquiry
- where the period in question is the subject of any other enquiry by the Inland Revenue
- in relation to asset valuations or other issues that do not involve the interpretation of tax law or its application in particular circumstances (see 'Post-transaction valuation checks for capital gains tax')
- where you need help in valuing assets for capital gains tax purposes
- where there is a statutory clearance procedure which is relevant to the transaction in question but no clearance application has been made.
Contacts
Inland Revenue Trusts address list
All UK resident trusts (except for some special trusts) are dealt with by one of three Inland Revenue Trusts offices. If you are in any doubt as to which office deals with a particular trust, please ring any listed below and they will be happy to help you.
| Area dealt with |
Inland Revenue Trusts |
|---|---|
| All UK resident trusts and estates with
a continuing trust established under Scots Law or administered
from an address in Scotland. UK resident trusts and estates with a continuing trust administered in Northern Ireland All UK resident trusts administered by corporate trustees, including UK banks and large professional trustee companies. All estates in administration in the UK within self assessment where there is no continuing trust. |
Inland Revenue Trusts Meldrum House 15 Drumsheugh Gardens Edinburgh EH3 7UL Tel: 0131 777 4343 Fax: 0131 777 4035 DX 542000 Edinburgh 14 |
| UK resident trusts and estates with a continuing trust administered from an address in the London Boroughs and in the counties of Cornwall, Devon, Somerset, Dorset, Wiltshire and Gloucestershire. | Inland Revenue Trusts Lysnoweth Infirmary Hill Truro Cornwall TR1 2JD Tel: 01872 245403 Fax: 01872 245315 |
| UK resident trusts and estates with a continuing trust administered from an address in England and Wales with the exception of those dealt with in Truro. | Inland Revenue Trusts Huntingdon Court 90-94 Mansfield Road Nottingham NG1 3HG Tel: 0115 911 6500 Fax: 0115 911 6501/2 |
Other useful addresses
| The Centre for Non-Residents (CNR) St John's House Merton Road Bootle Merseyside L69 9BB Helpline: 0151 472 6208 |
Inland Revenue Capital Taxes Helpline: 0845 30 20 900 |
You can also access the CNR website for more information.
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