A Will provides for residue to be held upon trust and pay income to a local institution for a period of 21 years and if that institution is in operation at the expiry of that period, it becomes absolutely entitled. If not, the capital passes to a Charity. The Will came into effect before 2006.
My question is how would practitioners deal with the taxation of the income?
Justin Wallace
Brewer Harding & Rowe
Unless the income has been mandated to the beneficiary, then I would suggest that this is an IIP and the trustees should account for any tax accordingly at basic, savings and dividend rates, If the income has been mandated then the trustees should tick the appropriate box on the SA900 and only report any chargeable gains. The local institution should then deal with the taxation of the income in its own hands according to what sort of institution it is e.g. if charitable or not for profit it may be able to make a repayment claim.
The 2006 changes mainly affect IHT not income tax.
Maxine Higgins
Citroen Wells
The testator has settled residue on Immediate Post Death Interest (IPDI), See Section 49A IHTA 1984. Income will be taxable at basic rate or standard dividend rate, depending on type of income, not Trust Rate as trustees have no power to accumulate it seems. Trust Registration with HMRC should be completed online to obtain a Self Assessment Unique Tax Reference for the Will Trust. Annual Trust Returns will be issued for completion by ‘lead Trustee’ & Tax Certificates R185 (Trust Income) should be given to the Institution to confirm net income & tax suffered on that for every tax year until final distribution when Capital Gains Tax will apply to any increase in the value of the Settled Assets from testator’s death date to distribution.
Gillian McClenahan
Willplantax