Two discretionary trusts - same settlor/same beneficiary/same Trustees. Both consist of quoted company investments only. Can one trust pay the small tax liability of the other (doesn’t have enough cash to pay, would otherwise have to sell some quoted investments). Assume not as not within the Trustee’s remit, and also will there be settlement implications? Saw an ICAEW article on it recently, but can't find it now that I need it :-( Thanks.
13th Jan 2021
Trust tax liability paid by linked Trust
Trust 1 pays the tax liability of Trust 2. Is this allowed?
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IMHO, the trustees are not asking their correct advisor. They should address their legal questions to their legal advisor(s) [and, FWIW, their tax and accounting questions to their tax and accounting advisor(s)].
I can imagine what their legal advisor(s), might say, but I'll leave her/him/them to say it. (I wouldn't advise my own trustee clients on legal matters; I would feel hypocritical if I gave an answer here that I thought might be used in anger.)
Btw... "linked". Your word? A tax word (that is therefore completely irrelevant to the question)? A legal word?
Btw2... you use "beneficiary" in the singular. There is I assume potential for that to change. Other people could, potentially, benefit from these trusts?
Btw3... could one trust loan to the other? (Again a legal question, but maybe one worth asking.)
Btw4... (having mentioned loans) don't forget Ss633/4 ITTOIA. It's a horrible rule.