Trust Holders: Who Should Complete a Self Assessment?

Many of those involved in trusts are required to complete an annual Self Assessment tax return. While conventional income is taxed at source, for example through the PAYE system, most trust income is paid gross – that is, before deductions. The Self Assessment process helps to ensure that all relevant tax is paid properly.

Self Assessment can seem like a hassle – and, in fact, trustees and others are often required to fill in additional pages that regular self-employed people do not have to worry about. But it is important to remember that you have a legal obligation to complete your Self Assessment if you are deemed to be required to do so.

It can seem difficult to determine who is required to complete a Self Assessment. So, as someone involved in the trust process, will you need to fill in a tax return?

Trustees

If you are a trustee, you will need to complete a copy of form SA900, entitled the Trust and Estate Tax Return. In order to ensure that you receive this form at the correct time, you are expected to register as a trustee with HM Revenue and Customs if you think that the trust will have to pay Income Tax or Capital Gains Tax. You should fill in form 41G for this. Both forms are available from the HMRC website.

Beneficiaries

If you derive income from a trust, you will have to declare this to HM Revenue and Customs. Depending on your circumstances, you may then be due a refund or required to pay some tax.

The forms that you need to fill in will depend on the trust type. If you are not sure what sort of trust you are a beneficiary of, you should ask the trustees. They may fill in a copy of form R185 for you, which will give you some of the information you need to complete your own tax returns for HMRC.

You need to register for Self Assessment with HMRC; details of how to do this are available on articles elsewhere on this site. In addition to the regular Self Assessment form, you will also need to complete Supplementary Pages SA107. If you think that you will be due a tax refund, you should also complete form R40 giving details of your claim.

Settlors

As a settlor, you will be transferring assets out of your own name and into trust. As a result, you may have some Capital Gains Tax (CGT) to pay. This is levied when you dispose of an asset, and it has increased in value during the time that it has been in your possession.

CGT can also be reported on the Self Assessment; again, you will need to register with HMRC in order to receive this. It is important to remember that you will also have to report any income that you derive from the trust if you are a beneficiary as well as a settlor.

HM Revenue and Customs can give general guidance on your tax responsibilities, but they cannot give specific advice. If in doubt you should speak to an accountant, or to your local Citizens Advice Bureau.