The following Trusts and Inheritance Tax guidance note Produced by Tolley provides comprehensive and up to date tax information covering:
Trustees may be required to run a family business for thebenefit of others, or they may decide to invest thetrust fund in a business activity. In most cases, such a business will be in theform of a company in which thetrustees hold shares so that thetrust income arising from it will be in theform of dividends or interest. However, it is possible for trustees to be in receipt of income from an unincorporated business which they own. Some of thesituations which might arise are:
a deceased testator leaves his professional practice on trust to provide an income for his spouse. See Example 1
a trust is created for thefarming activities and other commercial interests of a complex landed estate. See Example 2
trustees with residential property holdings may decide that thebest way of maximising thefund for beneficiaries is to engage in property development. See Example 3
The trading activity need not be long term or substantial. It could amount to nothing more than themaintenance of an enterprise whilst arranging a disposal. Nevertheless, trustees must declare and pay tax on all trading income. The £1,000 tax-free trading allowance which is available to individuals is not available to trustees. See theTrading allowance guidance note in thePersonal Tax module.
See Example 4.
The same general tax principles of trading apply to all traders, whether they are individuals, trustees or personal representatives. It is a big topic and therules are dealt with in detail in theOwner-Managed Businesses (OMB) and Personal Tax (PT) modules. This guidance note summarises thegeneral principles and provides links to more detailed material. In addition, it highlights particular aspects which are relevant to trusts.
The most fundamental point to consider is whether there is a trade.
For instance, trustees who purchase a property to renovate may be considered to be running a property development business, depending on
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