We have the pleasure of submitting our first tax return for an IIP Trust.
We will show the interest and dividend income the Trust has received and the tax paid on the SA900.
The trustees “smooth” the payments to the beneficiary over time, so the income disbursed to the beneficiary is different to the income received by the Trust.
The R185 requires us to separately state the interest and dividend income paid to the beneficiary along with any tax paid on that income.
Can I assume it’s then up to the trustees to decide how much of each income type to declare on the R185?
e.g. Say the Trust receives £800 interest income (£160 tax due) and £400 dividend income (£30 tax due) and paid the beneficiary £900. We could state on the R185 that the Trust paid £640 interest income (all of the net interest income) and £260 dividend income (some of the net dividend income). It’s then up to the trustees to keep track of how much of each type of income the Trust receives and pays out.
Apologies if this is obvious, this is our first tax return…
This forum is not the place for lay trustees to get free advice (although it seems people are increasingly trying to use it as such). I would strongly recommend that you engage the services of a suitably qualified professional to ensure that all your duties as a trustee are met.
The solicitor who set up the trust should be able to refer you to someone, or you could search on the STEP website.
A UK resident beneficiary of an IIP trust (ie one not discretionary in nature) is subject to income tax on the trust income as it arises whether or not the trustees make any payments thereof to the beneficiary.
The beneficiary’s income for a tax year is thus simply the quantum of income arising to the trustees in that tax year; each type of source is retained ie dividend income of the trustees is dividend income of the beneficiary etc. Any income tax charged/payable by the trustees on that income for that tax year becomes a tax credit in the beneficiary’s hands.