Grandfather paying school fees via our account

kladoink

I thought it might be viewed as income but I don't know. That's why I'm trying to find out!

We may have to do a self assessment this year with regard to child benefit and of course we have to declare income. The HMRC website states that tax is payable on income from trusts. Although the money is intended for the children, it's going through DH's account which is why I'm thinking there may a liability. I just don't know.

ETA Just read the gift part again. I guess it is a gift really, just a sizable, regular one.

cte1111

You need to ask your FIL the following questions:

What type of trust is it, e.g. interest in possession or bare trust?

Who are the trustees?

What is the residential status of each of the trustees? e.g. UK resident, dual nationality etc

Who are the beneficiaries of the trust? e.g. specifically the grandchildren or your husband

These all need to be answered before we can even hazard a guess at the tax status.

In general, gifts from income are not subject to income tax in the UK. So if your FIL was giving you money each month from his normal income (not capital), without impairing his own standard of living, then it would be completely tax free. Gifts in general are tax free, but may be relevant for inheritance tax. However trust income is much more complex and needs specialist (paid for) advice for a full answer.

Seanymph

The Trust is irrelevant because the trust are not giving you money. FIL is.

it's a gift.

Therefore no tax is payable.

xylophone

The Trust is irrelevant because the trust are not giving you money. FIL is.

It is not clear whether grandfather is benefiting from a (settlor interested?) Trust and using the money to make gifts to his son or whether he is the Trustee of a Trust set up to benefit his children/grandchildren and so is making payments as a Trustee.

A settlor interested trust can also be set up to benefit others as well as the settlor.

The question remains as above - is grandfather making gifts from his own income or acting as Trustee and distributing income/capital from a Trust to the Trust beneficiaries?

agrinnall

xylophone wrote: »

It is not clear whether grandfather is benefiting from a (settlor interested?) Trust and using the money to make gifts to his son or whether he is the Trustee of a Trust set up to benefit his children/grandchildren and so is making payments as a Trustee.

A settlor interested trust can also be set up to benefit others as well as the settlor.

The question remains as above - is grandfather making gifts from his own income or acting as Trustee and distributing income/capital from a Trust to the Trust beneficiaries?

But as Clapton has pointed out, the trust is not in the UK so is of no relevance to the OP's tax affairs, it would only be of concern to the FIL and the tax authorities in the country where the trust is formed.

xylophone

But as Clapton has pointed out, the trust is not in the UK so is of no relevance to the OP's tax affairs, it would only be of concern to the FIL and the tax authorities in the country where the trust is formed.

See link in http://www.hmrc.gov.uk/trusts/types/non-resident.htm Guidance for beneficiaries


If you’re a UK resident beneficiary of a non-resident trust you may have to complete a Self Assessment tax return and the SA107 supplementary pages. The guidance notes for these pages give details as to how you should complete them.
If you’re a UK resident and get income from a non-resident discretionary trust, you can get some tax relief if the trustees have already paid tax on the income. This relief is given by Extra Statutory Concession, ESC B18 - see below for more information.

Who are the beneficiaries? The grandchildren? The son?

CLAPTON

xylophone wrote: »

See link in http://www.hmrc.gov.uk/trusts/types/non-resident.htm Guidance for beneficiaries


If you’re a UK resident beneficiary of a non-resident trust you may have to complete a Self Assessment tax return and the SA107 supplementary pages. The guidance notes for these pages give details as to how you should complete them.
If you’re a UK resident and get income from a non-resident discretionary trust, you can get some tax relief if the trustees have already paid tax on the income. This relief is given by Extra Statutory Concession, ESC B18 - see below for more information.

Who are the beneficiaries? The grandchildren? The son?

without the actual wording of the trust it would seem that the purpose is for the benefit of the grandchildren


but one needs to know what it actually says

xylophone

the grandchildren

Who are minors but who are still liable for UK tax (although of course most children's income would be within the single person's allowance).

However, school fees can run to over £20000 a year per child and extras can add another couple of thousand - is the money being received in this order?

In the OP's position I would clarify matters.

kladoink

Thanks for all the comments so far. FIL is en route back to SA at the moment and we were unable to clarify anything with him. When I know he's there I'll drop him a line expressing our concerns and see what he can tell us.

I know that on occasion he has asked for written confirmation of the fees from the school to present to the trustees, but I don't know whether he is one of them or any of the other details.

I'll see what I can find out and will come back to this thread with more details if I can but it may be a while.

Thanks again for all in put so far!

kladoink

xylophone wrote: »

However, school fees can run to over £20000 a year per child and extras can add another couple of thousand - is the money being received in this order?

The school fees are not (yet) at that level. They are around £9k per child plus around £4-5k in extras