The following Trusts and Inheritance Tax guidance note Produced by Tolley provides comprehensive and up to date tax information covering:
This guidance note explains how trustees of bare trusts are treated for income tax and capital gains purposes. Although a bare trust is, in equity, a type of trust, for both income tax and capital gains tax purposes its existence is transparent. This means that no tax liability falls on the trustees in respect of their income and chargeable gains. Rather, the two tax regimes target and tax the beneficiary of such a trust at the beneficiary's rates of tax.
Although the income tax regime provides that bare trusts are not subject to the rules that apply to other types of trust, it does not explicitly say how to treat the income arising from property held in a bare trust. The following rules are established by case law:
any income arising to a bare trustee is assessable on the beneficiary as he is absolutely entitled to that income
the beneficiary must declare any income on his personal tax return
although the bare trustee may pay income tax on behalf of a beneficiary, it is the beneficiary who is chargeable to tax
any expenditure incurred by the bare trustee is not deductible by the beneficiary in computing his income tax liability
CIR v McIntosh 36 TC 334; Hamilton-Russell’s Executors v CIR 25 TC 200; TSEM8405
See Example 1.
In contrast to the income tax regime, the capital gains tax legislation
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