TAXABLE OR NON-TAXABLE?

Currently trusts must register if they are taxable relevant property trusts under the deadlines established under 4MLD, by taxable HMRC are specifically referring to trusts where a tax liability sits with trustees. This will soon be extended to all express trusts whether bare or relevant property & regardless of whether taxable or non-taxable under 5MLD.

It should be easy to distinguish which trusts are classed as bare or relevant property (i.e. discretionary.) More care must be taken in considering whether taxable or non-taxable. In essence a trust is classed as “taxable” if the trustees are liable to tax. A non-taxable trust might in practise become a taxable trust. 

 

For example, if we have an investment bond inside a discretionary trust & the trustees reach the 10-year periodic charge, does this make the trust taxable or is it still non-taxable?

If the calculations result in no tax to pay the trust remains classed as a non-taxable trust but if tax is due, it becomes classed as a taxable trust for TRS reporting.

For a breakdown of the difference between taxable and non-taxable trusts click the button below to the relevant page in the HMRC manual: