Trusts and tax returns

Tax practitioners who deal with a lot of trusts and estates have noticed a problem with trusts which have made capital gains – in nearly every instance the CGT due has been calculated incorrectly by HMRC.

This apparently only occurs where the trust tax return (form SA900) for 2016/17 was submitted online, which will generally be the case where a tax agent is involved. HMRC has said it is working to fix the problem, and has asked trustees to pay the right amount of tax, even if the online computation is incorrect.

Some good news contained in the HMRC Trusts and Estates Newsletter is that the £100 de-minimus for declaring savings income has been extended to 2017/18. Only where the trust or estate has savings income of over £100 does it have to submit a tax return.

The Trusts Registration Service (TRS) is still causing problems, particularly for agents who are not registered to submit electronic tax returns to HMRC. These would typically be solicitors who set up trusts but who do not generally submit tax returns, and if they do, they submit the tax return on paper. HMRC has promised to provide a solution for these agents in “early January” – which has come and gone.

HMRC is expecting 170,000 trusts and complex estates to be registered through the TRS by 5 March 2018. The actual deadline for registration is 31 January 2018, but HMRC will not impose penalties if the registration is completed by 5 March 2018.

Where a trust has a tax liability for the first time for 2016/17, it should register by 31 January 2018 in order to receive a UTR number which is needed to submit its tax return. However, HMRC has said that where the registration is prevented by technical issues they will take a “reasonable and “proportionate approach to penalties” where a paper tax return is submitted.

Written by the Tax Advice Network