Why do we need to prepare Trust & Estate Tax Return Forms, you may ask. There are two reasons why these Forms require to be completed:
During the period of administration of an estate as all of the assets are engathered, income is also being collected which is due to the residuary beneficiaries from the date of death of the deceased.
The income whether it’s from dividends or interest is taxable and this is due to be paid by the estate together with any gains made on the sale of assets.
Once Confirmation has been obtained we are required to assess whether the estate is regarded as a complex or non-complex estate under the rules specified by HMRC. If the estate is regarded as a complex estate HMRC are notified by registering the estate with the Trust & Estate Registration Service. Tax Forms are completed and tax payments are made on an annual basis. If the estate is regarded as non-complex the tax is calculated when the administration of the estate has been finalised and a voluntary payment can be made.
However, from April 2020, HMRC have introduced new rules with regard to the disposal of a property within an estate. HMRC require to be informed within 30 days of the date of completion of the sale, a new Capital Gains Tax Form has to be completed and any tax due thereon has to be paid.
When the Estate is finalised or when a payment to account is made a Form R185 (Estate) is issued to the beneficiary. The information shown on this Form should be included in the beneficiaries Personal Income Tax Return Form for the relevant tax year and may affect their Personal Income Tax position.
The funds that are invested in a Trust are also required to be taxed at the relevant rate according to the type of Trust and annual income received. The Trust & Estate Tax Form is completed on an annual basis and tax paid thereon. The same rules apply to Trusts as Estates with regard to the sale of a property.
Forms R185 (Trusts) are issued on an annual basis showing the income due to the beneficiary of the Trust for the relevant tax year. The information shown on this Form should be included in the beneficiaries Personal Income Tax Return Form for the relevant tax year and may affect their Personal Income Tax position.
All Trusts are now also required to be registered within the Trust Registration Service.
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