Interim Payments

In_a_spin

Thank you all for your advice.

We have paid the beneficiaries in full apart from the amount held in trust for the minors and a small contingency amount. As several people have said it was the best thing to do.

I did have a question about the R185s in the future. I was confused by the paperwork sent by HMRC. Do we have to do a tax return for each minor or one for the whole amount held in trust?

Thanks

dzug1

Depends how many trusts there are. If you arrange it so that there's only one then just the one return.

If tax is deducted at source or HMRC are satisfied that none is due HMRC may waive the requirement for the return

John_Pierpoint

You agree with the parent the best way of applying the income and then the parent or the minor fills in the tax return and provably reclaims the tax on the R185 just as any other tax payer doing a tax return would, in the name of the minor.

As my kids are now in their middle 30s it is a long time since I have had practical experience so I will leave you to research the current arbitary rules.

In_a_spin

There is only one trust, we have a savings account element of the executors account where the money will be held.

As per the will, the money is not be passed to the parents to oversee as unfortunately due to previous experience one of them could not be trusted with this duty.

John_Pierpoint

As the "children" are under18, you can run this trust as you see fit and accumulate the income if that is what you decide to do; however if the income is transferred to the children (ie put into an account in each child's name), then those children could most probably, depending on their other income, reclaim the 20% tax deducted..

As your savings account is deducting standard rate tax, the trust should not have "problems" with HMRC, for as long as the children are minors.

What does the will have to say about passing the capital to these beneficiaries?

The default is for the inheritance capital to be passed to the beneficiaries at the age of 18, often too young in my opinion.

Can we assume that the amount held in trust for the children is less than £325,000?

In_a_spin

Yes the amount is under 325,000.

The will says they are to get the money when they are 25, it was in the process of being changed to 21, however my Father died before he could sign the new will.

John_Pierpoint

25 was the traditional age for this sort of arrangement. Hopefully the child has matured a bit by then. Unfortunately Gordon Brown in 2006 decided that 18 was now the age of maturity, so at 18 the trust starts to be treated like a rich individual with no tax free allowance and then a tiny amount of standard rate band for income tax, before the rate goes up to 45%.

You might need to get professional advice on the best way to handle this situation or "invest" in something that does not produce income. [The beneficiaries can reclaim the extra tax as above, but for the trustee there is the hassle of administering the tax accounts including "the pool".]

http://www.hmrc.gov.uk/manuals/ihtmanual/ihtm42816.htm