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Sam, Accountant
Category: Tax
Satisfied Customers: 7544
Experience:  26 HMRC expertise, PAYE, Self Assessment ,Residency, Rental Income, Capital Gains, CIS ask for Sam Tax
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I am trustee grandfathers estate, the only asset left

Customer Question

I am trustee for my grandfathers estate, the only asset left being a 9 acre field which has been sold to the local council for £85,000. This will be divided amongst 22 family members, some receiving £9,300 others a third, half or quarter of that. Once payments are made the bank account will close and the trust cease.
Will any tax be demanded on this sale?
Submitted: 2 years ago.
Category: Tax
Expert:  bigduckontax replied 2 years ago.
Hello, I am Keith, one of the experts on Just Answer, and pleased to be able to help you with your question. Could you please expand on your position. You say you are a trustee for your deceased grandfather's estate. Is there a trust or are you the executor or administrator of his estate? Once this is cleared up I can advise you further.
Customer: replied 2 years ago.
I am the only trustee left alive. My cousin was appointed a trustee to facilitate the sale to the council. We think the trust being wound up now is not liable for tax, as the proceeds are to be divided 22ways. Any tax will be up to the individuals receiving the money. Can you confirm? I don't want to share out and then find a tax bill I can't meet.
Expert:  bigduckontax replied 2 years ago.
Oh, dear, I had rather hoped that you were going to tell me you were an executor etc. The taxation of trusts is highly complex. What sort of trust was it, when was the trust created and what was the purpose of the trust?
Customer: replied 2 years ago.
I am the administrator, executor or whatever. No one else has any authority. Present arrangement was made in 1970 when the said 9 acre field was left for motorway expansion in hands of 3 trustees (all now deceased) . I was appointed with a cousin (now deceased) in 1990s before my father, one of original three, has been rented out at £150 p a and we have paid about £30 income tax on this amount every year. I now want the thing finalised.
Expert:  bigduckontax replied 2 years ago.
I am sorry to be so difficult, but was this set up as a formal trust and was it discretionary? it seems a quite unnecessary process. Whom were the beneficiaries of the trust
Customer: replied 2 years ago.
It was set up to deal with the affairs of my grandfather, a farmer, who died in 1935, and his widow in 1947. There were 12 children, 3 of whom, including my father, became trustees to administer things. In 1960 and again in 1970 the building of motorways divided up the farm. It left this one piece of land, we are talking about on the opposite side of the motorway, and thus it was decided to leave this one asset in the hands of the 3 trustees, while the rest was sorted and sold etc.
It is not a formal or discretionary trust. The beneficiaries have been the descendants of the original 12 children, hence this final sale will be divided in differing ratios amongst about 22 grandchildren and great grandchildren.
Expert:  bigduckontax replied 2 years ago.
Scottish Widows gives the following resume of taxation of discretionary trusts: 'As well as the potential for an immediate IHT charge on the creation of the trust, there are two other points at which IHT charges will apply. These are known as periodic charges and exit charges. Periodic charges are on every 10th anniversary of the creation of the trust and exit charges may apply when funds leave the trust. The calculations can be complex but are a maximum of 6% of the value of the trust fund. In many cases they’ll be considerably less than this as in simple terms, the 6% is applied on the value in excess of the trust’s available nil-rate band. However, even where there is little or no tax to pay the calculations still need to be done. The tax on income and gains can also be complex, particularly where income producing assets are used. In addition, the trustee rates of tax are high, they are currently 50% on interest, 42.5% on dividends and 28% on capital gains. Many of these complications can be avoided by investing in life assurance investment bonds as these are non-income producing assets and allow trustees to control the tax points.' As you see the Trust would have been liable to tax on the income as well as periodic charges every 10 years. In addition there is an exit also. have these taxes been paid? Once they are all settled with HMRC then the residue can be distributed. I have a nasty feeling that these payments may not have been done so HMRC will have to be made aware of the trust's existence. The bill for non compliance xould be high and the trustees under pressure for failing to operate the trust in a proper manner. The Trust and its' trustees may well need trusted, local professional assistance in this matter.
Customer: replied 2 years ago.
In addition to it NOT being a discretionary trust it is not a formal trust. It was just three brothers, termed trustees, acting on behalf of the whole family
Expert:  bigduckontax replied 2 years ago.
Well, in view of the long period that this situation has been operating HMRC will not unreasonably class it as a trust. There may well be a liability to Capital Gains tax on the gain from original value as at the commencement before or after the War and it's market value on disposal to the local council. If this is classified as a bare trust then the tax liability falls on each beneficiary individually as though the gain were theirs. If a discretionary trust then the liability is the trustee's responsibility. The general advice in HMRC Help Sheet 294 emphasises that local professional guidance is essential.