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September 16, 2019

HMRC Extends Concession for Trusts with Small Amounts of Savings Income

HMRC has confirmed that the concession for trusts in receipt of small amounts of interest income has been extended to include the 2021/22 and 2022/23 tax years.

Under the arrangement, trustees and personal representatives ("PRs") are not required to submit tax returns or make payments under informal arrangements where the only source of income is savings interest and the tax liability is less than £100.

Why was the concession introduced?

From 6 April 2016, banks and building societies stopped withholding income tax on interest paid to individuals and trusts.

Whilst individuals were awarded with a  “Personal Savings Allowance” enabling them to earn up to £1,000 interest tax free, this allowance was not extended to trusts. Therefore, trusts with only a small amount of interest income were pulled into self-assessment, increasing the reporting requirements for trustees and PRs.

In light of this, HMRC made a temporary arrangement that meeting certain criteria removed a trust's obligation to submit a tax return. If a trust's only source of income is savings interest and the tax liability is under £100, then no tax return need be submitted.

This arrangement does not apply to trusts that receive dividends. Even small amounts of income from a distribution of profit means that a tax return will be required.

What about the Trust Registration Service?

If a trust is required to submit a tax return, the next step is registration with the Trust Registration Service (“TRS”).

Therefore, trustees and PRs will not be required to register a trust under the TRS if the trust falls within the above concession.

The TRS is HMRC's online hub for all tax-related trust activity, integrating new legislative standards and trustee responsibilities relating to anti-money laundering regulations within one service.

Further details on when you need to register a trust can be found on HMRC's website.

If you have questions about the tax responsibilities of trustees and how we could help, please contact a member of our team today.

Related Articles

Penalties for Trust Registration Service Announced (21 March 2018)

Trusts & Estates: Personal Savings Allowance (11 July 2016)

Contact us today to discuss your tax requirements.
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