Reporting trust changes and events to HMRC :Cross Stitch – Money, tax and benefits

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.

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.

HMRC will no longer issue a Trust and Estate Tax Return every five years if either of the following applies:

• the latest return shows that there was no trust income or chargeable capital gains
• you contact them to tell them that a trust is unlikely to receive income or make chargeable capital gains in the future

HMRC may however review the position periodically.

When the trust 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.

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.

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.

If a trust comes to an end or is wound up, you can wait until the end of the tax year to notify HMRC Trusts & Estates 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:

• notify HMRC Trusts & Estates
• complete a tax return for the period up to the date the trust ended

You will need to:

• make sure you can pay any tax that’s due
• find out whether ending the trust means that a payment of Inheritance Tax or Capital Gains Tax is due

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.

More useful links

Provided by HM Revenue and Customs