HMRC recently announced in their August Trust and Estate Newsletter that, following recommendations made by the former Office of Tax Simplification (OTS) and with working alongside professional bodies, such as the Chartered Institute Of Taxation (CIOT), the IHT forms have been updated.

This change has been long overdue and, from initial use on some clients, the forms seem more relevant and user friendly. HMRC have confirmed that these new forms should be used from now, however, the old versions will still be accepted up to 31 December 2024.

Trustee responsibilities in the UK

The above changes do serve as a reminder to Trustees of their tax obligations. Being appointed as a Trustee is an important role that comes with various legal responsibilities. In the UK, Trustees are required to comply with tax laws and regulations to ensure that the trust is managed properly and efficiently.

Here are some key responsibilities that Trustees need to be aware of:

Trust Register Service (TRS)

All trusts must register under HMRC’s Trust Register Service (TRS) unless they fall within the exclusions list. Trustees also need to inform HMRC of any changes in the trust within 90 days, such as changes in trustees or beneficiaries, and for taxable trusts, an annual declaration must also be made as part of the tax return process, again, unless specifically excluded from doing so.

Income Tax

Trustees are responsible for paying income tax on any trust income received. This can include rental income, dividends, interest, or any other income generated by the trust assets. Trustees need to submit an annual self-assessment tax return to report the income and calculate the tax due.

Capital Gains Tax

Trustees may also be liable to pay capital gains tax on any gains made when selling or gifting trust assets, such as property or shares. Trustees need to report any capital gains on the trust tax return and pay the tax due within the required timeframe. In addition, for UK residential property, Trustees may need to report the gain and pay the tax within 60-days of the completion date.

Inheritance Tax

Trustees are responsible for managing the trust assets in a tax-efficient manner to minimise any potential inheritance tax liabilities. Trustees should be aware of the current inheritance tax thresholds and exemptions, as well as any reliefs or allowances that may apply to the trust. Almost all Discretionary, and Interest In Possession trusts created since 22nd March 2006 will also need to consider IHT on the 10th anniversary and every time capital exits the trust.

Compliance & reporting

Trustees need to keep accurate and up-to-date records of the trust's financial transactions, income, and expenses. This information is essential for preparing the relevant compliance procedures above; all of which have their own deadlines which need to be met to avoid penalties and interest.

Summary

In conclusion, Trustees in the UK have significant tax responsibilities that require careful attention and compliance with tax laws and regulations. It is essential for Trustees to seek professional advice and guidance when required, to ensure that they are fulfilling their tax obligations and managing the trust assets effectively. By staying informed and proactive in managing the trust's tax affairs, Trustees can safeguard the trust's financial interests and protect the interests of the beneficiaries.

The next step

If you are a Trustee and need help with any of the above, please do not hesitate to contact Rebecca Horne-Smith on r.horne-smith@uhy-rossbrooke.com or your usual UHY personal tax adviser.

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