A group of people settle a property into a trust which they are also the beneficiaries of. They get taxed on the income of the trust as they have an interest in it.
Some of them then set up a company which they are equal shareholders in and assign their beneficial interest in the trust to that company. The question now is who gets taxed on the income and eventual gain on the sale of the property, and how is the purchase of the interest shown in the companys accounts?
Any thoughts would be appreciated.
Replies (11)
Please login or register to join the discussion.
This is still settlor interested
As this is still settlor interested the taxation continues to be with the individuals.
Hi Dave
A settlor interested trust exists if the settlor has any type of interest in the trust. Moving the beneficial interest into a company they also own means they are still a beneficiary of the trust.
My instinct would be that the income cannot be taxable in the company - tax paid elsewhere - but tax of some kind will bew due on getting the income out of the company.
What was the purpose of the transfer?
Evening Dave
I think you need to get a specialist to cast a quick eye over the documentation.
If the property was purchased, and at full market value, then there may not been a transfer of value, but where did the funds come from. If it was from the beneficiaries I would still expect this to be a settlor trust situation as the settlor legislation catches any property directly derived from the settled property i.e. the money settled
If you have avoided the trust situation then the income will be taxable within the company.