In this section:
- Trustee tax responsibilities
- Notifying HMRC about a new trust
- Reporting trust changes and events to HMRC
- Trust record keeping for tax purposes
Reporting trust changes and events to HMRC
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 and one day the trust will be wound up. For tax purposes, HM Revenue & Customs (HMRC) needs to know about these.
On this page:
- Assets are put into a trust
- The trust ceases to receive income
- The circumstances of the trustees change
- Trustees move abroad
- A tax agent is appointed or replaced
- A trust is wound up
- More useful links
Assets are put into a trust
You need to tell HMRC if assets or property are added to an existing trust. You do this by completing question 12 on the annual Trust and Estate Tax Return and sending the return back to your HMRC Trusts Office.
You will need to provide the name and address of the person who put 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 charges on transfers of assets into a trust. This will usually fall on 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
The trust ceases to receive income
If you realise that the trust is not likely to receive income or make chargeable capital gains for the foreseeable future, you can write to your HMRC Trusts Office and ask them to cancel the issue of your annual Trust and Estate Tax Return. If they agree, it is likely that you will only receive a tax return every five years. HMRC may review the position periodically.
If the trust later starts to receive income - or makes a chargeable gain - you’ll need to contact HMRC to ask for a tax return to be issued.
Bear in mind that if you receive a tax return from your HMRC Trusts Office after writing to say the trust no longer receives income you are still legally obliged to complete it - otherwise you may have to pay a penalty.
Find out which Trust Office to contact for help with tax on trusts
The circumstances of the trustees change
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 notify them at Question 20 on the Trust and Estate Tax Return. This takes longer, and you will need to bear in mind that 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.
The trust is allocated to an HMRC Trusts Office on the basis of the postcode of the professional representative acting on behalf of the trustees, or the principal acting trustee if there is no professional representative for the trust. In some circumstances, a change in address may mean that your trust is re-allocated to a different HMRC Trusts Office.
Find out which Trust Office to contact for help with tax on trusts
Trustees move abroad
If trustees move abroad, the trust may become a ‘non-resident’ trust.
In this case, you need to contact your HMRC Trusts Office and let them
know about the change in circumstances. They may decide that your trust
is best handled by another business area - HMRC Residency - that looks
after all non-resident trusts.
Find out more about non-resident
trusts
Find out which Trust Office to contact for help with tax on trusts
A tax agent is appointed or replaced
If you are a trustee, depending on the terms of the trust deed, you may be able to appoint a professional adviser, such as a solicitor or accountant, to represent you when dealing with the trust’s tax issues. In order for HMRC to communicate with a professional representative on the trust’s tax affairs, you will need to give your authorisation by filling out form 64-8 and sending it to HMRC at the address given on the form.
Note that if you appoint an agent you are still responsible for ensuring that all the trustees’ tax responsibilities are carried out satisfactorily.
Find out more about authorising an accountant to deal with HMRC for you
If you stop using or replace an agent, you need to notify your HMRC Trusts Office in writing so that future trust correspondence can be sent to the correct address.
Find out which Trust Office to contact for help with tax on trusts
A trust is wound up
If a trust 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 conclude matters quickly, you can do so. Before you proceed, you must have a final date for the termination of the trust. When you have this, you must:
- notify your HMRC Trusts Office
- complete a tax return for the period up to the date the trust was wound up
You will need to:
- make provision for any tax that may be due
- consider whether the ending of the trust will create an Inheritance Tax or Capital Gains Tax liability
If the property of the trust is 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
Find out which Trust Office to contact for help with tax on trusts
