Trusts and Estates with small amounts of savings income
In the latest Trusts and Estates Newsletter HMRC has confirmed the continuation of the interim arrangement for interest reporting.
In 2016 the requirement for payers to deduct tax at source on bank and building society interest was removed and income from these sources is now paid gross. Due to this change, trustees and personal representatives had increased reporting requirements.
HMRC introduced an interim arrangement so trustees do not have to submit returns, or make payments under informal arrangements, where the only source of income is savings interest and the tax liability is below £100.
HMRC has confirmed that these arrangements have been extended to include the 2019/20 and 2020/21 tax years. The situation will continue to be reviewed in the longer term.
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Internet link: GOV.UK Newsletter
More about trusts:
A trust is a way of managing assets (money, investments, land or buildings) for people. There are different types of trusts and they are taxed differently.
- the ‘settlor’ – the person who puts assets into a trust
- the ‘trustee’ – the person who manages the trust
- the ‘beneficiary’ – the person who benefits from the trust
What trusts are for
Trusts are set up for a number of reasons, including:
- to control and protect family assets
- when someone’s too young to handle their affairs
- when someone cannot handle their affairs because they’re incapacitated
- to pass on assets while you’re still alive
- to pass on assets when you die (a ‘will trust’)
- under the rules of inheritance if someone dies without a will (in England and Wales)
What the settlor does
The settlor decides how the assets in a trust should be used – this is usually set out in a document called the ‘trust deed’.
Sometimes the settlor can also benefit from the assets in a trust – this is called a ‘settlor-interested’ trust and has special tax rules. Find out more by reading the information on different types of trust.
What trustees do
The trustees are the legal owners of the assets held in a trust. Their role is to:
- deal with the assets according to the settlor’s wishes, as set out in the trust deed or their will
- manage the trust on a day-to-day basis and pay any tax due
- decide how to invest or use the trust’s assets
If the trustees change, the trust can still continue, but there always has to be at least one trustee.
There might be more than one beneficiary, like a whole family or defined group of people. They may benefit from:
- the income of a trust only, for example from renting out a house held in a trust
- the capital only, for example getting shares held in a trust when they reach a certain age
- both the income and capital of the trust