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Report Exit of £30,000 Capital - Trust Tax Return?

Discretionary Trust - Capital Cash Exit post-10th Anniversary - Do I Need to Complete CGT box 5.32 ?

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Trust is about 15 years' old now. Tenth anniversary IHT charge was nil.

Trustees paid out £30,000 capital to beneficiary 2019/20. IHT on exit is therefore nil.

The £30,000 is well within the 80% of £325,000 NRB so does not need to be reported for IHT purposes.

But what about ordinary Trust SA return Page TC 5 box 5.32 (person becoming absolutely entitled to any part of the (trust) property during the year). I appreciate this box is to disclose to HMRC details of the transferee and any capital losses as assets are passed to beneficiaries, but cannot make up my mind if box 5.32 also catches capital cash leaving the trust (obviously with no gain/no loss on cash). There are no CGT transactions for the year.

On the basis of Page 3, Question 5 of the SA900, there is no requirement to disclose. If this is correct it means that capital will have passed out without any knowledge of HMRC, and Question 5 does seem to override the CGT pages box 5.32 disclosure.

But HMRC will, of course, find out about it when the 20th anniversary IHT charge is disclosed to them.

I am torn between the desire not to make an unnecessary disclosure because of Question 5 and the need to make a full disclosure for the client's sake.

This question has perplexed me a number of times in the past.




Replies (6)

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By Tax Dragon
03rd Jul 2020 16:24

What a great question. I hope cathygrimmer is still around to provide a proper answer. Or have we lost yet another knowledgeable respondent?

FWIW in the meantime, my view is that you don't need to disclose, if(*) there's no tax at stake.

(*) "If" because, for example, there may be overseas aspects (which the forms pick up at Q16, not Q5, incidentally. Does that kind of support the "don't need" conclusion?) Also, zero IHT at the ten-year date is not enough to guarantee zero IHT on exit (but again, that's a different disclosure requirement).

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Replying to Tax Dragon:
By penelope pitstop
03rd Jul 2020 16:59

I think that in this case there would be no IHT payable on this particular exit.

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Replying to Tax Dragon:
By cathygrimmer
06th Jul 2020 09:51

Hi Tax Dragon - I'm still here!

I agree with you. There is no need to disclose a cash transfer on the CGT pages. Even if it generated an exit charge, that would be returned using IHT forms and wouldn't need to be referenced on the CGT pages of the trust return.

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Replying to cathygrimmer:
By Tax Dragon
06th Jul 2020 10:23

Hey, you've cheered me up just by saying hello!

Thank you.

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By Tim Vane
04th Jul 2020 10:08

What's the issue with reporting it anyway? It doesn't affect the computation of tax for the trustees and in the interests of full disclosure it seems sensible to include it if there is any doubt.

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By Tomazaan
09th Jul 2020 09:18

I would make the disclosure but then I was once told off by HMRC for not disclosing capital cash being paid to a beneficiary. It was a non relevant property IIP trust so no CGT or IHT at stake but I still got my knuckles rapped.
Until reading this question it never occurred to me that there may not be a need to disclose so next time I am in the same situation, I shall check again.
I love this forum!

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