I have a life interest trust under which the majority of the income is mandated to the life tenant and is therefore not reportable to HMRC by the trustees. However, the trustees have also received a small amount of income in the 2024/2025 tax year which has not been mandated to the life tenant. The total of that income is less the tax free allowance of £500.
The trustees have received a notice to file a tax return.
My reading of the legislation regarding the tax free allowance is such that the trustees do not have to report the non-mandated income to HMRC because their total income for tax purposes is less than the de minimis amount. The income which has been mandated to the life tenant is not treated as income of the trustees.
I would be interested to know if others have considered this point and whether they agree with me?
Diana Smart
Gordons LLP