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TaxVince
TaxVince, Accountant
Category: UK Tax
Satisfied Customers: 961
Experience:  Chartered Accountant >20 years + Qualified IFA
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I am a trustee of a family trust. The beneficiaries are my

Customer Question

I am a trustee of a family trust. The beneficiaries are my children.
I am having a bit of trouble with the tax return. I have ticked the ‘discretionary’ box as I thought that is what its status is. The rental money from a flat has been paid into the Trust Account and I have been transferring it to a beneficiary. A solicitor typed a small form which was signed by myself and the other trustee. This may have been a mistake as the Inland Revenue are going to tax this money at 50%. The beneficiary will have to claim it back at 22% (her tax rate).
If the rental money is paid direct to the beneficiary, bypassing the Trust Account, then does this mean it is no longer a discretionary trust? I have been advised that this would be clear in the Settlement Trust Deed However on reading it, it is .not clear to me. The discretionary box in the Tax Return has always been ticked to date (by previous trustees) and I am wondering whether the status of the Trust can be changed in this way. I hope it can, as the solicitor indicated thus. But what status would it be now if the rental money were paid directly to the beneficiary?

It may be of help if you could indicate where the wording would be found in the Trust Deed and what sort of wording it would be. Regards, Amanda
Submitted: 11 months ago.
Category: UK Tax
Expert:  Stuart J replied 11 months ago.
Thank you for your question here on Just answer. It is my pleasure to try and assist you with this today. Please bear with me if I need to ask for any further information from you in order for me to be able to advise you fully. My name isXXXXX and I am a practising solicitor. I have been an expert on this website in UK law since 2008. During that time, as you appreciate, I have answered thousands of questions from satisfied users on a variety of subjects.
Because we are all in practice with clients and court and other users, I might not always respond in minutes, particularly evenings and weekends. Please bear with me in that case. I will be online and off-line all day most weekdays and weekends.

Do you have access to the original trust deed?
Customer: replied 11 months ago.

Yes

Expert:  Stuart J replied 11 months ago.
I think this would be better dealt with in UK tax. I will arrange for admin to transfer it.
Customer: replied 11 months ago.

Do you mean that you will get a tax expert is going to respond to me? Amanda

Expert:  TaxVince replied 11 months ago.

Hi. Thanks for your question.

Should you find the answer below incomplete or you are not fully answered, please drop a reply before rating.

The tax treatment follows the nature of the arrangement you have in place -the ticking on the boxes is only following the facts on the ground. Indeed the income tax on discretionary tax is 50% even if the funds by pass the trust. The devil is in the trust deed and the intention of the settlor setting trust ie is it a disrectionary trust???

A discretionary trusts is a discretionary in two respects - (i) the trustees have the power to determine which beneficiaries (from within the class) will receive payments from the trust. or (ii) trustees can select the amount of trust property that the beneficiary receives.

Could you take a look at the trust deed and let me know what you have and i will add more detail to my answer. Thanks.

Regards

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