I5.1001 Introduction to taxation of trustees

IHT, trusts and estates

I5.1001 Introduction to taxation of trustees

Division I5.10     Income tax and CGT for trustees

Income tax and CGT for trustees—overview

For the latest New Development, see ND.1937.

I5.1001 Introduction to taxation of trustees

Definitions relating to trusts

There is no legal definition of 'trust'. The working definition followed by HMRC1 defines a trust as an obligation binding a person (called the trustee) to hold or deal with property for the benefit of another person or class of persons (of which they may be a member). The word is often used interchangeably with 'settlement'2, although a trust is really a type of settlement. A settlement is broadly an arrangement that creates an interest in property for beneficiaries, without giving them the legal interest.

In this Division, references to a trust do not include unit trusts or venture capital trusts.

A trust is most often constituted by deed, by Will or by an order of the court. There are only a few specific circumstances where HMRC will ask to see trust deeds, such as during an enquiry3.

Express words are not necessary for a trust's creation, nor indeed any writing, though an express trust of land or any interest therein must be evidenced by writing4. The conduct of parties may give rise to the implication of a trust which will be enforced by the courts.

By operation of law there may arise a constructive trust, as where a stranger to an existing trust receives trust property in such circumstances that the courts would regard them as holding it on behalf of

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