Taxation of trusts and estates—trading income
Taxation of trusts and estates—trading income

The following Private Client guidance note provides comprehensive and up to date legal information covering:

  • Taxation of trusts and estates—trading income
  • Is there a trade?
  • Trading profits
  • Basis of assessment
  • Trading losses
  • Reporting

FORTHCOMING CHANGE: As originally announced at Autumn Budget 2017 and followed up by written statement after Spring Statement 2018, plus an announcement in Budget 2018, the government ran a consultation on the taxation of trusts from 7 November 2018 to 28 February 2019, inviting views on the principles of transparency, fairness and simplicity that it believes should underpin the taxation of trusts. In response, in July 2019, the Office of Tax Simplification issued its second report on inheritance tax. See also the report published by the All-Party Parliamentary Group for Inheritance & Intergenerational Fairness in January 2020 recommending the adoption of a new inheritance tax regime. See also the research exploring the use of trusts which was also published on 7 November 2018. See News Analysis: Exploring the consultation and review on the taxation of trusts.

It is possible for trustees or personal representatives to be trading. For example, if a self-employed trader dies, the personal representative might run the business until it can be wound down or sold.

Similarly trustees or interest in possession beneficiaries may be trading and eligible for such reliefs as roll-over relief or entrepreneurs' relief.

The same general tax principles of trading apply to all traders, whether they are individuals, trustees or personal representatives. This Practice Note outlines these principles below.

Is there a trade?

The most