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TonyTax, Tax Consultant
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I am currently completing a Trust and Estate tax return for

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I am currently completing a Trust and Estate tax return for the 2013-14 tax year (by 31 October deadline.)
HMRC provide a lot of information, both online and in paper format, but some aspects are still unclear, especially as they have recently closed down tax enquiry offices where advice in person was available previously.
The trust in question is a discretionary trust, where my mother and myself (her son) are executors and trustees for my late father's estate.
Does this mean it can also be a bare trust, or interest in possession trust, or a charitable trust, as cited on SA900 2014 PAGE 2 Q1, 3 and 5 respectively, by HMRC, in addition to a discretionary trust?
The only income from the (Will) trust for the 2013-14 and previous tax year were some dividend payments from investment in shares. Do I include these in the return, and if so, where? The period of administration ended on 4 April 2014, with probate granted 10 January 2013.
Many thanks for your assistance.


Can you tell me a little about the trust please. Are you completing a return for the administration period of your late father's estate or for a trust created by his will? If the former, which I suspect is the case, when did you father pass away? Have the estate assets been distributed? If the latter, who are the beneficiaries of the trust? What does the trust document say about distributing income? Was the only income from dividends? If so, were these UK dividends?

Customer: replied 3 years ago.

I am completing a return for a trust created by ny late father's wiil, not for the administration period, which ended on 4 April this year (2014). My father died on 1 February 2012, and I completed the Probate process myself, which was granted on 10 January 2013.

As I understand it, the estate assets have not been distributed, because the only beneficiaries of the trust named in the will are myself, my mother and my brother, each defined in the will as discretionary beneficiaries.

Re distributing income, the the trust document says,

i) 'I GIVE BEQUEATH AND DEVISE all the residue of real and personal property wheresoever and whatsoever ("my Residuary Estate") to my Trustees UPON TRUST to sell call in and convert the same into money...'

ii) ...'the Trustees shall holdthe Trust Fund and the income thereof absolutely for the Benficiaries specified in para (iv) etc.. of Sub-clause (a) or to the survivor of them

iii) under a section headed Capital and Income:...''the Trustees may treat all dividends and other payments in the nature of income received by them at the date of receipt irrespective of the perod for which the dividends or other income is payable.'

The dividends were, to the best of my knowledge, the only income, resulting from a porfolio investment of shares in both British and foreign companies, but managed on our behalf by an investment management company, JM Finn, London.


Leave this with me while I draft my answer.
Hi again.

The trust is not a bare trust unless the beneficiaries have an absolute right to the income and capital of the trust on demand. There would be no real point in setting up a bare trust through a will unless one or more of the beneficiaries was under 18 in England and Wales or under 16 in Scotland. Take a look here for information on bare trusts.

An interest in possession trust usually gives a named beneficiary (the life tenant) the right to the income from assets held on trust or to live in a property during their lifetime. When they die, the assets pass to named beneficiaries absolutely. There is information on IIP trusts here.

A discretionary trust gives the named trustees discretion over when and if income and capital in some cases is paid out to the beneficiaries. There is information on discretionary trusts here. Your situation is confused somewhat by the fact that the trustees are also the beneficiaries.

Where income from trust assets is mandated directly to a beneficiary, it does not need to be disclosed in the trust return.

Your trust is not a charitable trust.

If anything, your trust is a discretionary trust though the wording in the will could have been more explicit I have to say.

UK dividends need to be disclosed in the boxes on page 5 of the trust return depending on whether they were paid by companies or unit trusts.

Foreign dividends need to be disclosed in the foreign pages SA904 which you can find here along with a guide to the return.

I hope this helps but let me know if you have any further questions.
Customer: replied 3 years ago.

Hello there

Thank you for your excellent reply.

Just one or two other questions in relation to the Trust and Estate Tax Return:

For Q5 on page 3, SA900 (the name of the HMRC type of form);

'Capital gains:

Did the trust or estate dispose of chargeable assets worth more than £43,600 in total?...'

What does this mean exactly? Is it selling or giving away assets? The only assets we sold were in the form of shareholdings that were transferred into Nominees by JM Finn, the company mentioned previously, who sold them on our behalf and purchased a number of collective investments (funds) in which we invested the money. When eventually completed, the total amount was about £67,000, but was just under £43, 600 - HMRC's figure in Q5 - as at 1 February 2012.

The dividend(s) referred to in my previous email and paid twice each year, although representing investment in both British and foreign companies, is paid as one single dividend figure or total. It cannot therefore be further broken down and entered as separate amounts under UK dividends, foreign dividends, etc. on the tax return. In view of this, where on the Trust and Estate Tax return do I enter this figure?

e.g. £ 670.00 as a UK and Foreign dividend income from the trust for February 2014?

Finally, do I need to use any of the additional supplementary pages available in relation to the dividend question in the paragaph above?

Many thanks for all your much appreciated advice.

It usually means selling. It can mean giving away in some circumstances.

The figure of £43,600 is per tax year and is equal to four times the annual CGT exemption for that tax year which would have been £10,900. The exempt amount of gains for most trusts is half the exemption for an individual so for 2013/14 it would be £5,450. Look here for more information. So, if the gains were more than £5,450 in 2013/14, the trust will have a CGT liability and the gains will need to be reported regardless of the £43,600 figure.

Assuming the shares were acquired from your late father's estate, each holding's cost would have been the market value at the time he died, the probate value. So, if they were sold soon after he died from within the newly set up trust, unless there was a major share value increase between the date of death and the date of sale, the trust gains for the tax year will probably be less than the annual exemption of £5,450. Trusts pay CGT at 28%.

Can you elaborate on the dividend of £670 please. I'm not sure I understand what you mean by it being paid twice a year. Do you mean that the nominees accumulate the dividends and pay them to the trust twice a year? The tax point for a dividend is the date of payment by the company in which the trust owns shares regardless of what the will says. They will need to be split between UK and foreign dividends as the tax treatment can be different in some cases. The nominees will have to break the figure of £670 down for you. See pages 14 and 15 of the SA950 trust return guide here.
Customer: replied 3 years ago.

Apologies; the £670.00 in question (actually £ 666.08) was in fact a dividend deriving entirely from overseas unit trusts. Thus there is no split between UK and foreign diviidends, although the nominees do then break this figure down in a Composite Tax Certificate, included in their end of the tax year report.

As you suggested above, the nominees accumulate the dividends and pay them to the trust twice a year.

Thanks for the clarification.

You need to complete the dividend section of the foreign pages SA904 which you can find here. You take the figures from the composite tax certificate provided by the broker.

You will also need to complete the capital gains pages SA905 which you can also find here if the proceeds for the tax year exceeded £43,600 and/or the gains exceeded the trust exemption for 2013/14 of £5,450.
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