How to pay CGT on life rent trust

hathorfam

On my father's death a life rent trust was set up that holds my father's share in a btl property and his share in my parents home. My mum is still alive and kicking. We have recently sold the btl property and are now trying work out how to pay the required CGT. I can see how to add a cgt account to my mum's hrmc account and pay the 50% she is due to pay but I cannot work out how to pay the remaining 50% for the life rent trust. The trust was digitally registered with hmrc and has a URN (not UTR) but when logging onto it in government gateway you can't add a cgt account. When I initially spoke to hmrc they suggested the trust needed to be re registered as a taxable trust to a get a UTR but then we would need specialized accounting software (costing significant sums) to submit annual accounts for the trust! I can't believe this is the only option and that that's what everyone else is doing in these situations? My mum is entitled to all income from the trust so it won't have any tax liability again(I guess until my mum dies etc) Can I just add a cgt account to my hmrc account and pay for the trust through that somehow? Any help appreciated!

poseidon1

There will be very few people in your mother's situation.

BTL properties held in a life rent trust ( or life interest trust as these are known in England) would be rare. These types of trust usually only hold a share of the non income producing family home so would not need to be registered as taxable trusts.

HMRC are quite correct, the trust should have been registered as taxable and accorded a UTR, with  50% of the rents liable to trustee income tax at 20%. How were rents being reported for tax purposes prior to sale, and how long was the property in trust?

The following guidance suggests a URN reference should enable you to lodge a trust CGT report, but clearly if that has not worked you need the UTR. What efforts have you made to get one issued?

https://www.gov.uk/guidance/report-your-capital-gains-tax-on-uk-property-by-post#:~:text=If you're reporting for,us before using this form.

As for  Trust tax software since the property disposal was during this tax year, you don't need to concern yourself on that point as yet. The 2025/26 return is not yet due, and you will have the option to submit this  in paper form by the October 2026 deadline.
In the meantime,  no  doubt you aware your 60 day time limit to  settle the trust's CGT liability is slipping away, so dealing with that via obtaining the UTR should be your priority.

If you have an issue with outstanding income tax returns for the reporting of past years  trust rental income , such returns may need to done electronically  in which case rather than invest in expensive software, maybe sensible to get an accountancy firm with commercial trust software to handle the formal submission  of past SA900 tax returns in due course. If trust tax rents have never been reported or tax paid thereon, there could be HMRC penalties and interest, unless your mother reported and  paid tax on the entirety of the rents including the trust share.

Finally I am assuming the property sale does not terminate the trust, so what are the plans for the trust's share of the sale proceeds going forward? I noted your comment that due to your mother being entitled to all the trust income, the trust will not have any future tax liabilties. What is your basis for this supposition?

hathorfam

https://forums.moneysavingexpert.com/discussion/comment/81854417#Comment_81854417

Thanks very much for this response @poseidon1. The details of the trust stipulate that all income from the property (or any trust assets) is for the sole use of my mother. All income from the property has gone through her self assessment until this point. She is only allowed to use the 50% capital from the sale to purchase another property but can use the income as she sees fit (I would assume this includes divs, interest income etc should we invest somewhere)

The link above looks very useful. I will take a read of that. Not sure how after clicking through the various links on hmrc website I missed this one.

When I spoke to the trust team at hmrc he questioned how I got their phone number (having been put through there by the general help desk) and they weren't particularly helpful. Just said I could do through my own account (add a cgt account) but I don't think this is correct/will work as there seems to be no way to specify it's for a trust, wants gross income and won't apply the correct rate etc etc.

Yes very aware of the 60 day period hence why keen to get it rectified asap. I have a call with the solicitor who set it all up on Monday so hope to get some more answers there also.

I think another call to hmrc is needed! Thanks again.

poseidon1

https://forums.moneysavingexpert.com/discussion/comment/81857259#Comment_81857259

I can't see how reporting the trust CGT gain via your own personal HMRC account makes sense or lead to a correct outcome.

You as a potential basic rate tax payer would only be liable to the lower 18% CGT rate as well as a £3,000 annual exemption. A trust is always liable at the higher 24% rate with only half the CGT exemption (£ 1500) to mitigate tax due.

In any event I can't see how they would marry up the trust SA900 return you would submit after April 2026 reporting the trust gain ( again), with the computation and tax paid via your personal account .

You need the trust UTR, and despite HMRC's trust division being run off its feet at this time of year, they are obliged to set this up for the trust to meet its self assessment obligations.

Best of luck with the solicitor conversation, although in my experience a tax accountant with trust competency likely to be of far more assistance in this scenario ( more their skillset).

hathorfam

Thanks @poseidon1 agreed re. Using my own account. Appreciate you taking the time to respond. I'll phone hmrc again tomorrow and see where I get too. The timing is not great given the time of year. Thanks again