Tax treatment of multiple trusts

I have been approached by a lady who would like to create two separate lifetime trusts. They will effectively be contingent interest trusts for her grandchildren when they reach 25. She would prefer two separate trusts so that the respective parents can be trustees of their own children’s fund. £50,000 will go into each trust.

If we register each trust separately at HMRC for income tax, aside from the fact that the standard rate band of £1,000 will be split between the two trusts, will the trustees all need to work together in any way to deal with the tax reporting for each trust?

Anna Howat
Chattertons Solicitors

If the trusts are completely separate – each established by a stand-alone trust deed with no reference to the other trust, then each should have its own standard rate income tax band and annual CGT allowance which will be applied without further reference to any other trust created by the intending settlor. It is only the allocation of the amount of the band/allowance that is affected by the number of settlements in existence during any particular tax year that is relevant, not what might happen within any such settlements.

So, basic answer is: No, the trustees of the individual settlements do not need to liaise in relation to the tax reporting for the individual trusts.

Paul Saunders