Have Tax Questions? Ask a Tax Expert for Answers ASAP
Hi. My name is*****'m looking at your question now and will post my answer or ask for more information here in a short while.
As a beneficiary of a discretionary trust, you should be given a certificate R185 Trust at the end of each tax year. This shows the income paid out to you and the tax paid on it. Trusts pay a higher rate of tax than most individuals so you may find that the income from the trust does not leave you owing any tax on that income. You need the form so that you can report the income correctly in your tax return. Different types of income are taxed differently. New tax rules that came in on 6 April 2015 changed the way dividends and interest are taxed as you can read under the heading "Discretionary trusts" here.
You don't necessarily have the right to know the trust's business even though you are a beneficiary. There is nothing unusual in that. Without sight of the documents, I cannot say what you saw which suggests the income you are "legally receiving" is higher than what has been paid to you. You need to remember, however, that a UK trust has to pay tax on its income and the income paid to you is net of tax. That's why you need the R185 Trust form. If you were not a taxpayer, you would be able to reclaim some or all of the tax paid on your trust income.
I hope this helps but let me know if you have any further questions.
You have a right to be notified of the gross income and tax deducted figures and that is normally done by the issue to you the beneficiary of an R185 Trust. You should demand one from the trustees. HMRC could ask to see it. I'd be interested to know what the trustee would say if you told him or her that HMRC wanted to see the R185 Trust
Is the trust a UK or an offshore trust?
A UK trust has to complete a trust tax return after the end of a tax year in which it discloses the trust income and capital gains and how much is has distributed to each beneficiary. Take a look at the trust tax return here. I would want to know why I haven't been issued with the R185 Trust certificate to which I am entitled.
You have several choices:
1 Ask the trustee for an R185TrustIncome for each tax year that you have been a beneficiary.
2 Tell HMRC that you aren't being provided with the R185TRustIncome certificates and ask them to check the trust returns to confirm whether the income figures you have reported are correct or not.
3 Consult a solicitor to force the issue. It wouldn't surprise me if the trust wasn't submitting tax returns.
That's what I would do.
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Thanks and good luck with your issue.