Bare Trust

Income generated

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Client has a bare trust capital was used to buy some properties. Income generated is put on clients tax return - property income pages. My understanding is that the capital is not taken into account when assessing for means tested state benefits but the income generated from the properties will be. Can anyone confirm the above 

many thanks 

Jonathan 

Replies (7)

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By Marion Hayes
13th Jan 2017 20:18

A bare trust merely holds an asset with no beneficial ownership. The capital remains the sole property of your client - its just like looking through a net curtain.
Any means testing I assume follows the usual rules where they either look at actual income, or a deemed income based on the capital.
Are you sure he understands what a bare trust is? It is unusual to say the least for a bare trust to endure very long.

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Replying to Marion Hayes:
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By jonibarnes
13th Jan 2017 23:46

No client doesn't understand they want me to amend the return by ticking the box to add the supplementary trust pages.

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By jonibarnes
14th Jan 2017 09:48

Related to the above question same client also wants to pay her husband for being her carer, no problem, but she is insisting that's it's a tax deductable expense against the property income. I cannot see how it can be.

Her reasoning is that it's all part of the personal injury trust and without having a carer she would not be able to maintain the properties.

Anyone got any thoughts ?

Thanks for any input

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By Marion Hayes
14th Jan 2017 12:25

Personal injury trust?
You need to see the trust deed urgently, identify the source of the funds which created the trust, and the surrounding circumstances.
The impression you are now giving is that of an injury settlement being invested to provide for your clients future needs which could actually be a vulnerable persons trust.
Whilst a deed may allow her to pay for a carer this is not a tax deductible expense. It might also preclude a claim for carers allowance or associated benefits.
However, paying someone to manage/maintain the properties might qualify for tax relief.
once you have more information we might be able to help

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By jonibarnes
14th Jan 2017 15:31

Thanks again for your reply. It's a personal injury claim for which a bare trust was set up. The money was paid into a bare trust as doing so means the capital is ignored when assessing for means tested benefits. As accountant I'm only really concerned with completing the tax return correctly and im pretty sure the income is assesed as the clients and she can't claim carers allowance. I have already suggested paying her husband to help with maintenance but for some reason she is adamant that she should get tax relief paying him as a carer.

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By Marion Hayes
14th Jan 2017 16:08

I have googled ( I do hate that phrase! ) and found confirmation that it could be a bare trust. All income and gains from a bare trust are declared on the beneficial owners tax return as if the trust was not there. You do not use trust pages.
I remain unconvinced on the benefits front.
As a result you claim expenses for tax purposes in the usual manner.
i.e. no expenses can be claimed. against interest, property income expenses do not include providing a carer

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By jonibarnes
14th Jan 2017 17:15

Thanks for your replies Good to get someone else's input. When clients are so adamant it's easy to start doubting yourself!

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