Charitable - is a tax return required
Help! Having taken on some new outsourcing work, I have come across a situation which I have not seen before. A trust has been in existence for many years. Originally it had two humans as beneficiaries, both of whom have now died leaving two charities as residuary beneficiaries. On the second death the trust simply stopped doing tax returns, on the basis that it was a bare trust for charitable purposes.
The trust assets comprise two substantial residential properties let on protected tenancies since the 1940s, the tenants of both are into their early 80s. Not surprisingly the trustees do not wish to sell, as they see a substantial uplift in value arising on the ending of these protected tenancies. Obviously the timing of this uplift is not certain. There is a rental surplus each year which is accumulated by the trustees for the purpose of carrying out improvements to the properties post the ending of the tenancies and before sale.
My question is whether the trust should be submitting a tax return annually, paying tax on the rental surpus at basic rate, and then giving the charities forms R185 to allow them to reclaim the tax?