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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.
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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.
The person who set up the trust - the settlor - may have given instructions that trustees carry out various functions. These may 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 types of trust and tax implications
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:
All the 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
Trustees are responsible for making sure that any income or gains is declared and tax is paid.
If you're a trustee and haven't already received a Trust and Estate Tax Return you must notify HMRC when:
Find out more about when to notify HMRC about a new trust
Find out when to notify HMRC about changes to a trust
Trustees need to keep a record of the trust's income and expenses. You need these records to complete the Trust and Estate Tax Return.
Find out more about trust record keeping
If you receive a tax return or a notice to file a return from HMRC, you have to either fill in a return and send it back, or submit a return online, even if your trust hasn't received any income or made any gains that year. It's important to think about whether HMRC really needs to be told about your trust. To avoid having to complete a tax 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 one of the main ways 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 ending.
Get help completing the Trust and Estate Tax Return
Reporting trust changes and events to HMRC
Tax return deadlines and penalties
For most kinds of trust it is the trustees' responsibility to make sure that all tax due is paid on time. Find out more about deadlines, penalties and how to pay below.
Find out more about Tax return deadlines and penalties
It's the trustees' responsibility to provide the beneficiaries of discretionary payments with a statement when asked, showing how much income they received in a tax year. The statement should also show the tax paid on that income. You can download form R185 (Trust Income) to do this. This form can also be used by trustees to inform interest in possession trust beneficiaries of their entitlement.
If the trust is settlor interested the trustees can use form R185 (Settlor) to notify the settlor of the amount of income to be taxed to the settlor and the amount of tax already paid on behalf of the settlor.
Download form R185(Trust Income) and other important forms for trusts
Download form R185 (Settlor) for settlor-interested trusts
For Inheritance Tax purposes trustees are responsible for letting HMRC know when a 'chargeable event' occurs with a trust. A chargeable event may include:
Use form IHT100 Inheritance Tax Account to tell 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
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)
