How JustAnswer Works:
  • Ask an Expert
    Experts are full of valuable knowledge and are ready to help with any question. Credentials confirmed by a Fortune 500 verification firm.
  • Get a Professional Answer
    Via email, text message, or notification as you wait on our site.
    Ask follow up questions if you need to.
  • 100% Satisfaction Guarantee
    Rate the answer you receive.
Ask bigduckontax Your Own Question
bigduckontax
bigduckontax, Accountant
Category: Tax
Satisfied Customers: 3816
Experience:  FCCA FCMA CGMA ACIS
75394688
Type Your Tax Question Here...
bigduckontax is online now

I am a trustee for a trust which has just been wound up what

Customer Question

I am a trustee for a trust which has just been wound up what will the capital gains tax rate be for shares sold and for a property sold
Martin Turner
Submitted: 2 years ago.
Category: Tax
Expert:  bigduckontax replied 2 years ago.
hello Martin; I am Keith and I will try to help you with your question. Please advise of what sort of trust are you a trustee? Here is the HMRC list of possibilities:
'Bare trusts
With a bare trust each beneficiary has an immediate right to both capital and income - find out more including the tax rules
Interest in possession trusts
With interest in possession trusts, beneficiaries have a right to all trust income - learn more and find out how they're taxed
Discretionary or accumulation trusts
Discretionary trust trustees choose whether to pay out trust income, accumulation trust trustees re-invest income - find out more
Mixed trusts
Mixed trusts combine different types of trusts – find out how they work and check the tax implications
Settlor-interested trusts
The 'settlor' who puts assets into a trust can continue to benefit from those assets - how this works and how it affects tax
Parental trusts for children
Special tax rules for trusts set up by parents for unmarried children below the age of 18
Non-resident trusts
UK trusts may be set up or managed by people living abroad – find out about non-resident issues and how they affect tax
Trusts for vulnerable people
Special tax rules for trusts set up for disabled people or children who have lost a parent'
As the tax treatment between these is different I have to know the type of trust before I can continue with my response.
Customer: replied 2 years ago.

Discretionary Trust. The original benefactor stated in her will that income from a small amount of capital and the use of a house for free should be enjoyed during his lifetime of a named beneficiary and when that named beneficiary died, the house and small amount of capital should then be returned to the Trust for the benefit of four named beneficiaries. The original benefactor died in January this year. The house which was purchased in September 1994 has just been sold. The proceeds of the capital and from the house is about to be distributed to the four beneficiaries. I need to know how much money the trust should retain to pay the tax. Thank you for your assistance

Expert:  bigduckontax replied 2 years ago.
Capital Gains Tax must be paid on any gain made when the assets are disposed of. Here is the HMRC advice:
'Discretionary or accumulation trusts and Capital Gains Tax
Capital Gains Tax is a tax on the gain in the value of assets such as shares, land or buildings. A trust may have to pay Capital Gains Tax if assets are sold, given away or exchanged (disposed of) and they've gone up in value since being put into trust. The trust will only have to pay the tax if the assets have increased in value above a certain allowance known as the 'annual exempt amount'. Trustees are responsible for paying any Capital Gains Tax due.
Beneficiaries aren't taxed on any trust gains and don't get credit for any tax paid by the trustees.'
Any gain is reduced by 5.5K, the Annual Exempt Amount (AEA), and any gain in excess of that is taxable at 28% for which allowance should be made before distribution. The gain is the difference between the purchase price plus costs including Stamp Duty Land Tax [if any], any improvements eg extensions, installation of double glazing or a central heating system, but not routine maintenance. This sum represents the acquisition price and the difference between that and the net selling price is the gain, less, of course, the AEA.
I do hope I have shed some light on your responsibilities as a trustee and the possible tax liabilities of the trust on closure and final distribution.
Customer: replied 2 years ago.

Keith

Thank you your information is helpful. When you say the annual exempt amount is 5.5K, presumably that means that as the shares bought in the Trust and the house owned by the Trust were acquired on the death of the benefactor in Oct 1994 i.e. 20 years ago, then the total exempt amount is £110,000?

I presume that the £110,000 exemption would apply to the total capital gain, or could it apply to the gain of the house value and then again a further £110,000 to the gain of the shares sold?

I apologise for my delay in making this further query, I had to go to the dentist to have a wisdom tooth removed, this completely knocked me out.

Best

Martin Turner Tel. 01892 783803

Expert:  bigduckontax replied 2 years ago.
Unfortunately Martin, no. The AEA is an 'Use it of loose it' [HMRC definition] annual concession so the gain from the probate value in 94 plus improvements against the net disposal price (for the landed property) and ditto for the shares and is chargeable at 28% after deducting one tranche of 5.5K. If the sales can be staggered over two tax years then there would be an AEA for each year, but in the great scheme of things it is small beer. There is going to be a hefty tax bill here.
So sorry to have to rain on your parade.
I was very lucky. I have wisdom teeth and the final advice was 'Leave the bloody things alone!' This was OK for years until lower right eight started to give endless trouble and my man said it had to come out. Needless to say I was slightly apprehensive. He numbed it down, told me he was pushing in to start and 5 seconds later said 'That's it!' It proved to have minimal root structure which explained the endless problems. Never looked back! So there I am, 71 with all my teeth bar one which broke in half with a sliver of mussel shell and my new man couldn't save it. There's a cantilever bridge in there now, a brilliant creation of the lab, you simply cannot see that it isn't real.
Please be so kind as to rate me before you leave the Just Answer site.
bigduckontax and other Tax Specialists are ready to help you
Expert:  bigduckontax replied 2 years ago.
Thank you for your support.
Customer: replied 2 years ago.

Keith

Please confirm that the annual capital gains tax exemption is only £5.5 K?

Someone I know with no qualification said he was pretty certain that it was double this amount??

Martin Turner

Tel. 01892 783803

Expert:  bigduckontax replied 2 years ago.
He was correct for individuals where the 14/15 Annual Exempt Amount is 11K.
However, for trusts it is only half that at 5.5K, sorry, Martin.
bigduckontax and other Tax Specialists are ready to help you
Expert:  bigduckontax replied 2 years ago.
Delighted to have been of assistance.

Related Tax Questions