Income from a Will Trust

How is it taxed on the beneficiary?

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Had an email from a client over the weekend asking if her income from the will trust set up after her late husband died had been included on her Return?  This was all news to me and I had no knowledge of any Trust set up.  I've just received the Consolidated Tax Vouchers for 2021 and 2022. She copied her son and grandson into the email (son is a Trustee and grandson is a Chartered Accountant) and I've asked them if the Trust has been registered, if Trust Returns have been submitted and whether there are any R185's.  Something at the back of my mind says possibly none of these have happened.

The capital was left to the children but my client has all of the inome for life.  My question is, if Trust Returns have not been completed and, bearing in mind she is the only beneficiary of the income, can it just be declared on her Return?  She is not a higher rate taxpayer although has substantial investment income of her own.

Replies (6)

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By Justin Bryant
23rd Jan 2023 09:29

I think the income can be mandated from trustee to life tenant so only the latter files re the income. Just do a Google search on that.

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By bernard michael
23rd Jan 2023 09:37

Any answers to your query may be relevant to me as I have a similar situation. The income from a Will Trust was declared on the beneficiary's (wife) tax returns. She has now died and it turns out the Trust wasn't registered. The solicitor acting for the family estate is expecting me to register it so it can be wound up. Also now to prepare a Capital Gains computation for the 15 years life of the Trust I claim registering it is her problem as she has all the relevant details

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By ireallyshouldknowthisbut
23rd Jan 2023 10:26

Its probably an "interest in possession" trust.

If all the income is remitted to the beneficiary, there is no requirement for the trust to file any returns, and its just the beneficiaries income.

Ie bang it on the return, job done.

I don't know the rules on the trust register. I keep as well away from that as I can, but there would not normally be any trust accounts or trust tax return filed if all the income is directly remitted.

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Replying to ireallyshouldknowthisbut:
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By Catherine Newman
23rd Jan 2023 14:58

That is my understanding of it too.

I registered a Will Trust but it formed a Discretionary Trust. It was rather tricky-"Do you know the residence status of the Settlor-Yes 6 foot under. Do you know the mental capacity of the settlor at the time of registration-none. Only Civil Servants could come up with this. The widow probably didn't even notice. I did explain it was insensitive to the Financial Adviser who asked me to do it.

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Replying to ireallyshouldknowthisbut:
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By Catherine Newman
23rd Jan 2023 15:00

That is my understanding of it too.

I registered a Will Trust but it formed a Discretionary Trust. It was rather tricky-"Do you know the residence status of the Settlor-Yes 6 foot under. Do you know the mental capacity of the settlor at the time of registration-none. Only Civil Servants could come up with this. The widow probably didn't even notice. I did explain it was insensitive to the Financial Adviser who asked me to do it.

I suspect that if you register HMRC will set up a taxable record with disastrous consequences as I have found out with someone registering a bare trust.

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