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
Trustee tax responsibilities
Trustees who are responsible for managing a trust have joint responsibility for ensuring that tax is properly declared and paid. If you're a trustee you can get professional help, but the overall responsibility is still yours. The key duties of a trustee in relation to tax are outlined below.
On this page:
- Types of trust and trustee responsibilities
- If there is more than one trustee
- Trustee obligations for Income Tax and Capital Gains Tax
- Trustee obligations for Inheritance Tax
- Get professional help for your trust
Types of trust and trustee responsibilities
The extent of a trustee's responsibilities depends on the type of trust it is. For example, in a 'discretionary trust', a trustee is responsible for deciding when to make payments to beneficiaries as well as declaring and accounting for tax on trust investments. In a 'bare trust', the trustee may have few duties to perform: providing they are old enough, the beneficiaries will decide how to use trust capital and income and are responsible for declaring and paying any tax due.
Similarly, the person who set up the trust - the settlor - may have given instructions that trustees carry out various functions. These will be contained within the 'trust deed', which outlines the terms of the trust. Trustees are legally bound to act on these instructions.
Find out more about different types of trust and how they work
If there is more than one trustee
Where there is more than one trustee you normally arrange for one person, known as the 'principal acting trustee', to deal with HM Revenue & Customs (HMRC).
The actions of the principal acting trustee are treated as actions of all of the trustees, so:
- if he or she deals with everything properly, all of the trustees are treated as fulfilling their tax obligations
- if he or she fails to fulfil the trustees' obligations, all of the trustees are treated as failing to meet their obligations
Note that all trustees of a trust are jointly liable for any tax due, not just a share of it. As a result HMRC can recover any tax or interest on tax from any trustee if the principal acting trustee doesn't pay or pays late. Also, any trustee can be held liable for penalties or surcharges incurred during the period he or she was a trustee.
Find out more about tax return deadlines and penalties
Trustee obligations for Income Tax and Capital Gains Tax
Some of a trustee's duties relate to the taxation of the trust - making sure that tax is properly declared and paid.
Notifying HMRC that tax is due
If you're a trustee and haven't already received a Trust and Estate Tax Return, you must notify HMRC when a new trust that will receive income or make chargeable capital gains has been set up, or when a trust that has not been receiving income or making chargeable capital gains starts to do so. The time limit for notification is within six months of the end of the tax year for which tax is due.
Find out more about when to notify HMRC about a new trust
Find out when to notify HMRC about changes to a trust
Keeping records of the income and chargeable gains of the trust
It is the trustees' responsibility to keep a record of income and expenses. You need these records in order to be able to accurately complete the Trust and Estate Tax Return.
Find out more about trust record keeping
Completing and sending back any tax return issued to you
If you receive a tax return from your HMRC Trusts Office, you have to fill it in and return it, even if your trust hasn't received any income or realised any gains that year. It's therefore important to think about whether HMRC really needs to be told about your trust. To avoid having to complete a return unnecessarily it's better to wait until your trust is receiving income or has made any chargeable capital gains.
The Trust and Estate Tax Return is also the main way to notify HMRC about changes and events that affect the status of the trust, such as new assets transferred into it, changes of address of the trustees, or the trust winding up.
Get help completing the Trust and
Estate Tax Return
Find out more about changes to and events in a trust
Paying tax due on the income or chargeable gains of the trust
For most kinds of trust it is the trustees' responsibility to ensure that all tax due is paid on time. Find out more about deadlines, penalties and how to pay below.
Link to 'Tax return
deadlines and penalties'
Find out more about how to make
a Self Assessment payment
Supplying information to beneficiaries
It is the trustees' responsibility to provide beneficiaries with a statement showing how much income they were entitled to, and/or they received, in a tax year. The statement should also show the tax paid on that income. You can use form R185(Trust Income) for this purpose - available to download from the HMRC website.
Download
form R185(Trust Income) and other important forms for trusts
Trustee obligations for Inheritance Tax
For Inheritance Tax purposes, trustees are responsible for letting HMRC know when a 'chargeable event' occurs with a trust. A chargeable event may include:
- a trust passing a ten-year anniversary
- assets being transferred out of a trust
Trustees will use form IHT100 Inheritance Tax Account to notify HMRC about a chargeable event and pay any tax due.
Find out more about Inheritance Tax and
trusts
Find
form IHT100 Inheritance Tax Account and guidance notes
Get professional help for your trust
Understanding tax on trusts can be difficult. You might like to get professional advice from a tax adviser or solicitor to help you. However, if you do, remember that the trustees are still all legally responsible for ensuring that the trust’s tax affairs are carried out satisfactorily. You'll find some links below to professional organisations - though not all professionals are registered with them.
Find a solicitor on the Law Society of England and Wales website
Find a solicitor on the Law Society of Northern Ireland website
Find a solicitor on the Law Society of Scotland website
Get help from the Society of Trust and Estate Practitioners - STEP website
In order for HMRC to be able to communicate with your agent or professional representative on trust Income Tax and Capital Gains Tax matters, you need to fill out form 64-8.
Find out more about completing form 64-8
If you want HMRC to communicate with your agent or professional representative on Inheritance Tax issues that occur during the lifetime of your trust, you must enter the relevant contact details on form IHT100.
