Hi. My question concerns an 18-25 Trust - parent died December 2021, beneficiary has absolute entitlement at age 25 - currently age 24. This type of Trust seems to fall between cracks for much of the guidance. It seems like it’s a Bare Trust, but not really as it’s under the special 18-25/BM legislation. Or is it a Discretionary Trust with an 18-25 twist?
The residual estate (following administration) is being held in Income Bonds. There is no other ‘property’. The Trust is accruing interest on the Income Bonds which is being assimilated into the Trust.
Q1. Is the estate liable for tax or capital gains tax on the interest received (less than £500 in year to April 2023, probably £4k in the final year of the Trust); and if so at what rate?
Q2. The SA900 suggests that for a bare trust the Trustees don’t need to complete the return, just go straight to Q17 (the tax calculation). In that case how would HMRC know that tax is due? But this takes us in a loop back to whether this is considered a Bare Trust or not which could make this question irrelevant!
I’m hoping this is relatively simple for you knowledgeable folk. Any advice gratefully received.
Once again I must advise that this forum is here for professionals to discuss tricky points, not to give free advice to lay people hiding behind pen names. I am not sure what the moderators are doing letting this type of query through.
You will no doubt have paid the IFA a market rate for their advice when investing in the bonds (or did you just do it yourself)? I suggest you now (also) pay a solicitor/ accountant a market rate for them to advise you on this. I would have expected the solicitor who did the probate to have looked after this until the beneficiary was 25. Perhaps that is where you should start.
While you may have a beef with the moderators, please don’t take it out on me. The site encourages people to sign up, and it is hardly the fault of ‘lay people’ who are just seeking some simple guidance. No one is ‘hiding’ anything. if the system allows people to sign up without any requirement to have a professional email address or prove professional status that isn’t the fault of the innocent ‘lay people’ looking for information.
You could have just passed this by without posting a snide response, or report it to the moderator, or make suggestions about having the forum behind a firewall to avoid joe bloggs getting ‘free advice’. But no … you had to post a snarky message.
I apologise for seeking ‘free advice’ and will close my account and go elsewhere. Thanks for putting me right.
The “About” section says https://trustsdiscussionforum.co.uk/about “The Trusts Discussion Forum is a moderated mailing list dedicated to discussion by practitioners of topics relating to the drafting and administration of trusts, wills and other private client issues including taxation.” It is thus clearly not a forum for non-practitioners to request free advice, although you may find useful commentary on here.
When I first posted a while ago my post was blocked because the moderators thought I hadn’t included my firm’s name. I had. This is why I am particularly conscious of lay people posting – they clearly cannot have shown their firm’s name in their profile.
I sympathise and this recurring problem should surely be addressed by the moderators because, just as you say, if anyone can sign up they should be entitled to know what kind of questions are in order. The key to your query is that simple guidance cannot be given without sight of the trust document and probing for further facts. I further sympathise because in the distant past HMRC would have engaged with a lay taxpayer’s request for clarification.
I very much doubt that this is a bare trust but if the contingent beneficiary is entitled to income from age 18 for income tax it will operate very much like one unti the contingency is fulfilled or fails. It will not be a bare trust for CGT because the beneficiary is not absolutely entitled but will become so if they reach 25, with a charge on underlying chargeable assets if any. As the beneficiary is 24 the special rules in IHTA s71D-G will not prevent a an IHT charge on reaching 25 but will apply a special rate.
