I have substantial trust non residential gains for 2024/25 the bulk of which are pre 30th October and an annual exemption of £1500.Is it acceptable to calculate the tax on the pre 30th October gains at 20% on the gains without deduction of the annual exemption and on the post 30th October gains at 24% on the gains less the annual exemption?
The alternative is to apply the rate of 20% to the gains less the exemption for the whole year and then to add 4% of the post 30th October gains which gives a higher total liability.
The annual exempt amount for trustees is set by s1K(5) and para 5 Sch 1C and is set against the total chargeable gains for the whole relevant tax year. The rate of tax under s1H(8) is 24% for tax year 2025 but subject to s7 FA 2025 which only applies that rate to gains arising on disposals on or after 30 October 2024.
In CG10245 HMRC say that the AEA, and any losses, can be allocated to the best advantage of the taxpayer, a surprising and shameful omission by the legislation. So the (pathetically paltry and unindexed fiscally-dragged) AEA can be allocated first to the gains chargeable at 24%.
Is it not wonderful that we have the deeply empathetic tax authority to proclaim the law that Parliament’s negligence or ignorance has omitted?
And, of course, if a settlor sets up 100 trusts they each have an AEA of £150 or £150,000 in total, subject to the GAAR. TRS would be somewhat of a pain.
The trustee AEA is given by s1K(8) not (5) and Sch 1C. Apologies. Curiously an individual’s AEA can be used to best advantage: s1K(5). And their losses as well as those of trustees can be offset against gains to best advantage: s1F. This makes the omission from Sch 1C even more strange.
HMRC have not updated the way in which they capture the gains for the year. The tax return now has a box 5.17B to enable the appropriate adjustment to be icluded. The above link is to their helpful calculator in order to calculate the adjustment to be posted.