I am wading through the various help sheets from HMRC re trust payments to beneficiaries (discretionary trusts)
I can follow the SA 107 instructions fully in respect of a payment received 'from income of the trust' ie I have the 185 and am able to claim back an amount of tax paid as far as within my tax brackets
what I cannot see or find anywhere, is how and where to show/declare a payment received that is out of the original trust setup fund
trust is not over IHT levels and is 30 years established so not applicable to withdrawal charges etc
does anyone have any advice please
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payment from discretionary trust
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Re: payment from discretionary trust
If by "out of the original trust setup fund" you mean that the trustees appointed part of the capital of the trust to you as beneficiary, then there is no need for you the beneficiary to report it. I am assuming it is a cash payment - in specie transfer of shares is more complicated as it may be advantageous to claim gift holdover relief.
However, there may be an IHT reporting requirement on the trustees. You say "trust is not over IHT level and is 30 years established" - in order to avoid the requirement to report the capital appointment the trust must qualify as an "excepted settlement" - very simplistically this means it is resident in the UK and the value at the last 10 year anniversary is 80% or less of the NRB at the point of the exit. The exact calculations depend on whether there are previous appointments of capital. Note that there can be a requirement to report IHT even though there may be no exit charge to pay.
However, there may be an IHT reporting requirement on the trustees. You say "trust is not over IHT level and is 30 years established" - in order to avoid the requirement to report the capital appointment the trust must qualify as an "excepted settlement" - very simplistically this means it is resident in the UK and the value at the last 10 year anniversary is 80% or less of the NRB at the point of the exit. The exact calculations depend on whether there are previous appointments of capital. Note that there can be a requirement to report IHT even though there may be no exit charge to pay.
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Re: payment from discretionary trust
helfordpirate wrote:If by "out of the original trust setup fund" you mean that the trustees appointed part of the capital of the trust to you as beneficiary, then there is no need for you the beneficiary to report it. I am assuming it is a cash payment - in specie transfer of shares is more complicated as it may be advantageous to claim gift holdover relief.
However, there may be an IHT reporting requirement on the trustees. You say "trust is not over IHT level and is 30 years established" - in order to avoid the requirement to report the capital appointment the trust must qualify as an "excepted settlement" - very simplistically this means it is resident in the UK and the value at the last 10 year anniversary is 80% or less of the NRB at the point of the exit. The exact calculations depend on whether there are previous appointments of capital. Note that there can be a requirement to report IHT even though there may be no exit charge to pay.
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many thanks indeed
yes in case I wasnt clear it would be a cash payent by trustees to a qualifying beneficiary,,,,would a 185 be required as no reclaim would be applicable????
I fully understand how to handle the trust tax return
i just wanted to know if the beneficiary had to do anything
thanks again
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Re: payment from discretionary trust
mutantpoodle wrote:,,,,would a 185 be required as no reclaim would be applicable????
R185 is only for trust income remitted to a beneficiary where the trustees have paid tax on it.
Capital payments are by definition not income and so R185 is not relevant.
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