Will Trust, Trustee Account, NS&I Growth Bond

confuseddottycom

Hi, have spent many hours trying to understand best approach re bank account for a Will Trust for my deceased father (and have read many threads/looked at various websites.. Bath/Skipton/Metro/Bunckinghamshire, etc). Am really hoping that the collective brains here can confirm if following approach is acceptable

Objectives are to put £35K in appropriate account(s) to earn some interest and enable me (Trustee) to pay HMRC for tax due on interest.

Please let me know if you can see any issues with following:
1. Open a non-interest paying current account in name of trustees (to use to pay HMRC)
2. Close existing Coventry/HSBC accounts in name of deceased & transfer £s to above account
3. Open an NS&I Growth Bond (3.6% for 2 years) in name of trust, using cheque from trustee account
4. Ensure that Trust minutes and accounts clearly document all of above

End results = no income for trustees self assessment.
Income for Trust to be declared on SA900 Tax Form (for a reasonable rate of interest)

On a related note, any concerns re using Absolute Tax software to submit SA900 form, as I missed Octover deadline & this is the cheapest I can find which looks reasonable £25+Vat

Keep_pedalling

Who is the beneficiary of the trust? As they will be receiving the income they are responsible for any income tax due. 

confuseddottycom

Various family member are beneficiaries of the trust. However they will not receive any income if money remains invested in a Growth Bond

Keep_pedalling

Ah! Sorry I assumed by will trust you were talking about an emmediate post death interest trust but it seems your father has lumbered you with something more complicated. 

poseidon1

confuseddottycom said:

Hi, have spent many hours trying to understand best approach re bank account for a Will Trust for my deceased father (and have read many threads/looked at various websites.. Bath/Skipton/Metro/Bunckinghamshire, etc). Am really hoping that the collective brains here can confirm if following approach is acceptable

Objectives are to put £35K in appropriate account(s) to earn some interest and enable me (Trustee) to pay HMRC for tax due on interest.

Please let me know if you can see any issues with following:
1. Open a non-interest paying current account in name of trustees (to use to pay HMRC)
2. Close existing Coventry/HSBC accounts in name of deceased & transfer £s to above account
3. Open an NS&I Growth Bond (3.6% for 2 years) in name of trust, using cheque from trustee account
4. Ensure that Trust minutes and accounts clearly document all of above

End results = no income for trustees self assessment.
Income for Trust to be declared on SA900 Tax Form (for a reasonable rate of interest)

On a related note, any concerns re using Absolute Tax software to submit SA900 form, as I missed Octover deadline & this is the cheapest I can find which looks reasonable £25+Vat

Interesting to note trust and estate tax return software now available for non professional use.

 Can't comment on the cheapest you have found, and you may struggle to find anyone on this forum who have had cause to use any form of software for trust tax compliance purposes. However here's a link to another provider below which  may be of interest ( although I accept you probably found this yourself).

https://taxfiler.co.uk/solutions/individuals-self-employed/trust/

As for your plan of action, if £35k is largely the extent of the trust fund, your plan makes sense to me as a way to minimise your trust compliance for a couple of years until the bond matures. 3.6% is certainly better than most dedicated building society trust saving accounts. 

As a matter of interest will the trust income eventually be taxed at basic rate or the 45% rate for trusts with power to accumulate income ?

confuseddottycom

@keep_peddling... it is a discretionary will trust, which I believe can stay active for up to 125 years

@poseidon1... thanks! I did look at taxfiler software, but that seemed more expensive

I believe that for 2023-34, then £1000 will be taxed at 20% with remaining interest (not much) taxed at 45%
I think that beneficiaries can claim a tax refund via R40 form if lower rate tax payers, but this would only be a few £s.

Please note that this is the first time that I have had to complete an SA900 - trust interest did not hit tax threshold in previous 3 years - hence I am desperately trying to work out what I am doing

Keep_pedalling

confuseddottycom said:

@keep_peddling... it is a discretionary will trust, which I believe can stay active for up to 125 years

@poseidon1... thanks! I did look at taxfiler software, but that seemed more expensive

I believe that for 2023-34, then £1000 will be taxed at 20% with remaining interest (not much) taxed at 45%
I think that beneficiaries can claim a tax refund via R40 form if lower rate tax payers, but this would only be a few £s.

Please note that this is the first time that I have had to complete an SA900 - trust interest did not hit tax threshold in previous 3 years - hence I am desperately trying to work out what I am doing

Does the trust only have £35k in it? 

poseidon1

confuseddottycom said:

@keep_peddling... it is a discretionary will trust, which I believe can stay active for up to 125 years

@poseidon1... thanks! I did look at taxfiler software, but that seemed more expensive

I believe that for 2023-34, then £1000 will be taxed at 20% with remaining interest (not much) taxed at 45%
I think that beneficiaries can claim a tax refund via R40 form if lower rate tax payers, but this would only be a few £s.

Please note that this is the first time that I have had to complete an SA900 - trust interest did not hit tax threshold in previous 3 years - hence I am desperately trying to work out what I am doing

Respectfully, given the complexity, record keeping and effort involved, a discretionary trust with such a small amount in it seems pointless and a burden for very little reward from all points of view. I would point out that Trusts generally don't receive much favour by many on this forum and discretionary trusts are a particular subject of opprobrium.

Can I assume it covers a group of children under 18? If so I would be exploring a  non income producing option such as a life insurance company investment bond for long term growth.   

 Alternatively, purchasing a succession of very low coupon government gilts to provide tax free returns on maturity would also be worth considering. However if you have little or no personal knowledge of investing, the trust fund seems very small to warrant professional advice but perhaps the IFAs on this forum could offer a view.

Depending on the age of the youngest child ( if indeed the trust is for minors ), perhaps  consider  winding it up and fully distribute when the youngest attains 18? I am struggling to understand your father's rationale for establishing such a small complex trust fund. Was his will professionally drawn up by a solicitor who explained the implications on you ( as trustee) of such a trust?

confuseddottycom

@Keep_pedalling the trust also contains my dad's share of the house. Which is occupied by my mother & carer
@poseidon1 there are various reasons not to distribute the cash in the Trust at this point, but thanks for your feedback
The will was drawn up by a solicitor and implications were explained

poseidon1

confuseddottycom said:

@Keep_pedalling the trust also contains my dad's share of the house. Which is occupied by my mother & carer
@poseidon1 there are various reasons not to distribute the cash in the Trust at this point, but thanks for your feedback
The will was drawn up by a solicitor and implications were explained

OK, the house changes things entirely.

However if it is part of the discretionary trust fund when the 10 year trust anniversary occurs, hopefully the collective value of the share of the house together with cash will not exceed the nil rate band. You will already know a 6% IHT charge could arise if that were the case. What was the value of the Trust's share of the house on your father's death?

confuseddottycom

@poseidon1 house value in trust is below IHT threshold - it was ~ £110K at time of death.
Will Trust has been in existence for 3 years.
I am just try to work out most appropriate option for the cash, as I need to move it from my deceased father's bank accounts & am completing a tax return for the first year, hence want to make it simple for future years