TSEM1006 - Introduction to Trusts: introduction: does a trust exist

Sometimes taxpayers claim that they hold assets on trust for someone else. If there is no formal trust deed to support such a claim, the claim may be open to doubt. If you are unsure whether a trust exists in a specific case, and it is material for Income Tax or Capital Gains Tax purposes, consult the guidance in TSEM9000+. But if the tax issue is private residence relief (TCGA92/S225), consult the guidance in CG65400+.

Sham trusts

Sometimes in the course of an enquiry, HMRC may argue that a trust is a ‘sham’, that is, that the trust was set up with intentions other an as expressed in the deed.

It is purely a question of fact whether or not a trust is a sham.

Under TSEM1711 and TSEM2125 technical advisers in HMRC Trusts & Estates Technical Edinburgh can advise on the construction of a particular trust deed as it appears. They may also give general advice on the concept of ‘sham’. But it is up to the compliance staff (for example in SCI) conducting the enquiry to decide whether a particular trust is a sham, based on investigation of events beyond the deed itself.