The taxation of trusts is based on the personal tax regime. The determining factor is most commonly the entitlement of the beneficiaries. This document discusses the types of trusts and the taxes they are subject to, and the reliefs available: Income Tax, Capital Gains Tax and Inheritance Tax. However, the application of these taxes varies according to the status and terms of the trust.
Points discussed within this guidance note:
> Introduction to Taxation of trusts
Trusts are subject to the same taxes as individuals: income tax, capital gains tax and inheritance tax. The first step in working out how a trust is to be taxed is to read the trust instrument to assess what type of trust it is.
> Beneficiaries’ entitlement
The tax status of the trust depends on the beneficiaries' entitlement to capital and income. This note explains Bare trusts, Interest in possession, Discretionary interest and Flexible or combined trust. The taxation will depend on the type of trust.
> Bare trust
> Interest in possession
> Discretionary interest
> Flexible or combined trust
> Inheritance tax
> Income tax
> Capital gains tax
> Annual exemption
> Rate of tax
> Hold-over relief
To view the full guidance note register for a free trial or if you already have access to TolleyGuidance please use the 'login' button below:
You may also be interested in
This document discusses how to calculate the income tax liability on the income of discretionary trusts and any trusts where income may be accumulated. It also covers rates of tax, income belonging to other persons, income used to pay trustees; management expenses, and the standard rate band.
Trading and investment businesses relief
This document discusses about the various reliefs available for relevant property businesses. This also covers the meaning of non-qualifying investment activities, exemptions available for qualifying holding companies, excepted assets and determining BPR status of certain corporate structures.
Request a Free Trial to TolleyGuidance to gain access to the full article
TolleyGuidance is produced by specialists within the field, our tax guidance materials provide actionable insights and practical guidance to support you day-to-day. We don’t just inform you about the latest changes in the tax world. We take the time to explain the implications and, most importantly, what actions you need to take for your clients.
A bit about you: