I have heard that there is a proposal to stop the mandating of income to IIP beneficiaries for tax purposes. Apparently mandated income is going to be ignored and all income will need to be reported and taxed via the Trust Tax Return. I can’t see this proposal anywhere - can anyone help with details of the proposals or is this just a rumor?
Rebecca Potton
Myers Clark
A rumour I believe, but bank interest and dividend income will now be received gross, so trustees may be less happy about mandating as I believe they remain responsible for tax if the life tenant does not return the income.
There may also be an issue, in that the dividend income may not be treated as such when paid to the beneficiary for the purpose of the new personal savings allowance.
Simon Northcott
In the good old days when clients had a large portfolio it was customary for my client trustees to choose one asset (eg a large holding of a particular government stock) and mandate that to the solicitors (or the trustees, I suppose). All other assets could then be mandated as they are now.
I can’t comment on whether dividend income is treated as such when it has turned into trust income.
Julian Cohen
The main problem for trustees when mandating income streams is the ability thereafter to cover the trust management expenses legitimately chargeable against income i.e. a cash flow problem.
For an IIP trust the beneficiary’s income is categorised between the various sources (as indicated in the form R185) and its identity is not lost; unlike a discretionary trust where the identity of the source income is lost.
Maxine Higgins
Citroen Wells
Yes, but the reason for mandating it is to reduce those expenses!
Simon Northcott
I take Maxine’s point, but surely trustees with proper advice can invest
for a balance of capital growth and income which allows for expenses to be
met from capital, so permitting income to be mandated?
Kevin Mullen