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TonyTax, Tax Consultant
Category: Tax
Satisfied Customers: 15979
Experience:  Inc Tax, CGT, Corp Tax, IHT, VAT.
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I hope you might be able to advise me whether I have an

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Hello, I hope you might be able to advise me whether I have an issue. I receive an income from a discretionary trust. I have done my tax return for the past two years based on the income I receive into my bank account. I have been told previously by the trustee that the Trust 'is none of my business' and so I have never been able to check any details. Last year I did see a tax document that showed the income I am legally receiving is slightly higher than what has been deposited in my account (about £1200 higher). I had no idea of this discrepancy due to the trustee's secrecy regarding the Trust. Do I have anything to worry about?

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.

Customer: replied 1 year ago.
Thank you. I think it must have been the R185 Trust form that I caught a glimpse of. The income allocated to me was above the income I had received and declared to the Inland Revenue. From what you say however, am I right in thinking this is okay and I have nothing to worry about? I may never see another R185 so I need to know that it is okay if what I declare to the Inland Revenue on personal tax statement is slightly different from the income shown on the R185.

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

Customer: replied 1 year ago.
That's way forward for the future- stating to the trustee that it's the HMRC that want to see it. I will try that and cross my fingers! That now leaves two years where I wasn't able to see the R185 and gave the HMRC inaccurate figures. Do I need to alert the HMRC of this, or just make sure things are accurate from now on? I really want to know if I need to worry about the inaccuracy.

Is the trust a UK or an offshore trust?

Customer: replied 1 year ago.
It's a UK 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.

TonyTax and 2 other Tax Specialists are ready to help you
Customer: replied 1 year ago.
Thank you. I think option 2 might be my best way forward.

That's what I would do.

Would you mind rating my answer before you leave the site please.

Thanks and good luck with your issue.