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Apart from receiving income and making distributions to beneficiaries, trusts may go through some key changes and events in their lifetime. Trustees may change, the assets held in the trust may change or the trust may end. For tax purposes, HM Revenue & Customs (HMRC) needs to know about these.
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HMRC will no longer issue a Trust and Estate Tax Return every five years if either of the following applies:
See the section ‘The trust ceases to receive income’ to find out more.
You need to tell HMRC if assets such as money, land or property are added to an existing trust. You do this by completing question 12 on the annual Trust and Estate Tax Return - form SA900.
You'll need to provide the name and address of the person who put the
assets into the trust, a description of the assets and an estimated value.
To find out more about completing the Trust and Estate Tax Return, follow
the link at the end of this article.
There may also be Inheritance Tax and Capital Gains Tax to pay on transfers of assets into a trust. The person responsible for paying this tax will usually be the person putting the assets into the trust.
Find out more about Inheritance Tax charges on transfers into a trust
Find out more about trusts and Capital Gains Tax
Find out which Trust Office to contact for help with tax on trusts
If you realise that the trust is unlikely to produce income or make chargeable capital gains for the foreseeable future, you can write to your HMRC Trusts & Estates Office and ask them to cancel the issue of your annual Trust and Estate Tax Return. If HMRC agrees to your request they will send you a letter to confirm this and they won't issue further tax returns unless you notify them that the situation has changed. HMRC may however review the position periodically.
Where HMRC receives a Trust and Estate Tax Return that shows the trust produced no income and made no chargeable capital gains, they will write to you to confirm that they no longer need you to complete a tax return in future.
If the trust later starts to produce income - or makes a chargeable capital gain - you’ll need to contact HMRC to ask for a tax return to be issued. You must do this within six months of the end of the tax year in which the trust starts to produce income.
Remember, if you receive a tax return from HMRC or a notice to file a tax return after writing to say the trust no longer produces income you're still legally obliged to complete a tax return - otherwise you may have to pay a penalty.
Find out which Trust Office to contact for help with tax on trusts
HMRC needs to know when trustees’ contact details change. This doesn’t just apply to the main trustee - the ‘principal acting trustee’. As all trustees are jointly liable for the activities of the trust, HMRC needs up-to-date records for everyone. They therefore need to be notified of any new or retiring trustees.
If you’re a trustee it’s a good idea to let HMRC know in writing as soon as there is a change to your contact details. You can also tell them by filling in Question 20 on the Trust and Estate Tax Return. This takes longer, and the return and statement of account only gets sent to the postal address that HMRC holds for the principal acting trustee or their professional representative.
Find out which Trust Office to contact for help with tax on trusts
If any of the trustees move abroad, the trust may become a ‘non-resident’
trust. In this case, you need to contact HMRC Trusts & Estates and
let them know about the change in circumstances.
Find out more about non-resident trusts
Understanding trusts can be difficult. You may want to seek the advice of a solicitor or tax adviser. Remember though that the trustee is still legally responsible for making sure that the trust's tax affairs are dealt with completely and correctly. You'll find some links below to professional organisations - although not all professionals are registered with them.
If you want HMRC to communicate with your agent or professional representative on trust Income Tax and Capital Gains Tax matters, you'll need to fill in form 64-8. Follow the link below to find out more about completing form 64-8.
If you want HMRC to communicate with your agent or professional representative on Inheritance Tax issues you'll need to enter the relevant contact details on form IHT100.
Find a solicitor on the Law Society of England and Wales website (Opens new window)
Find a solicitor on the Law Society of Northern Ireland website (Opens new window)
Find a solicitor on the Law Society of Scotland website (Opens new window)
Get help from the Society of Trust and Estate Practitioners - STEP website (Opens new window)
Find out more about completing form 64-8
If a trust comes to an end or is wound up, you can wait until the end of the tax year to notify your HMRC Trusts Office. You will then get your final tax return. All dates for filing the return and making a payment remain the same.
However, if you want to finalise matters quickly you can do so. To do this you must have a fixed date for the end of the trust. When you have this, you must:
You will need to:
If the trust assets are distributed before any outstanding tax is paid then you might have to pay that tax out of your own pocket.
Find out more about trusts and Inheritance Tax
Find out more about trusts and Capital Gains Tax
