HMRC SDLT: SDLTM31730 – Application: Trusts and powers

Principles and Concepts of Trusts and Powers

This section of the HMRC internal manual provides guidance on the application of trusts and powers. It outlines the key principles and concepts necessary for understanding their operation within the UK tax framework.

• Defines the roles and responsibilities of trustees.
• Explains the difference between discretionary and fixed trusts.
• Discusses the tax implications for beneficiaries.
• Provides examples of how trusts are applied in various scenarios.
• Offers guidance on compliance and reporting requirements.

Trusts and Powers: Who Are the Relevant Trustees?

When dealing with land transactions, it is important to understand the roles and responsibilities of trustees involved in the process. This article explains the key aspects of who the relevant trustees are and what their duties include in the context of making a land transaction return.

Understanding Relevant Trustees

In any land transaction, there may be one or more trustees who have the authority to act on behalf of the trust. These are known as the relevant trustees. They are responsible for completing and submitting the land transaction return, which is a legal requirement.

According to the guidance available, any of the trustees who hold this responsibility can submit the return. However, there are a few important points to note about this process:

• All relevant trustees must confirm that the return is complete and accurate.
• If a return is filed, it must be done by the trustees who are recognised as responsible for the transaction.

Completing the Land Transaction Return

When submitting a land transaction return, all relevant trustees must sign a declaration. This signifies that they agree the details provided in the return are correct and complete. It’s not sufficient for only one trustee to provide this confirmation; the responsibility is shared among all relevant trustees involved.

HM Revenue & Customs Communication

When HM Revenue & Customs (HMRC) interacts with the trustees regarding the land transaction, there are specific rules governing how notices, assessments, or amendments are communicated:

• Any official communication from HMRC, such as notices or assessments, must be sent to all relevant trustees. This ensures that everyone involved is aware of the proceedings.
• While all relevant trustees must be notified, it is possible for any one of them to make an appeal or apply for a closure notice. This means that just one trustee can pursue these actions without needing consent from the others.

Key Principles of Trustee Responsibilities

Trustees play a vital role in managing the trust’s assets, including land transactions. Their responsibilities can be summarised by the following principles:

• Duty of Care: Trustees are expected to act with a level of care and attention that would be expected from a responsible person managing their own affairs. This includes ensuring compliance with all legal requirements.
• Accountability: All relevant trustees should work together and hold each other accountable for the management of the trust’s affairs and decisions made, especially relating to land transactions.
• Transparency: Communication is key among trustees. They must ensure that all actions taken regarding the trust are transparent to each other, as well as to the beneficiaries of the trust.

Examples of Relevant Trustee Scenarios

To illustrate how relevant trustees operate in different scenarios, consider the following examples:

Example 1: Sale of Trust Property

Imagine a trust owns a piece of land that they decide to sell. In this scenario, all relevant trustees will need to collaborate to prepare and submit the land transaction return to HMRC. They will jointly review the information to ensure it is accurate, and all trustees will need to sign the declaration confirming this before submission.

Example 2: Transferring Land to a Beneficiary

Suppose the trustees are transferring ownership of a property to a beneficiary. Again, all relevant trustees must be involved in the return process. They need to ensure that it reflects the correct details of the transaction, including the value of the property, so that HMRC has the right information.

Dealing with HMRC Notices

If HMRC sends a notice or letter regarding the land transaction, all relevant trustees must receive it. This ensures that everyone is kept informed about any inspections, assessments, or required actions. Let’s break this down:

• If HMRC considers more information is needed, they will send a request to all relevant trustees, ensuring that everyone is equally informed.
• If the trustees wish to appeal an assessment received from HMRC, any one of them can initiate the appeal process. This means they do not need agreement or approval from the other trustees to take this step, as long as they follow the correct procedure.

Summation of Roles and Responsibilities

Effective management of land transactions within trusts requires relevant trustees to work closely together. Here’s a brief overview of their roles:

• Submit accurate land transaction returns.
• Ensure all trustees are informed about communications from HMRC.
• Collaborate to resolve any issues arising from assessments or notices.
• Support transparency and accountability amongst themselves.

Understanding these responsibilities is crucial for the smooth operation of any trust involved in land transactions. The role of the relevant trustees is not only important for compliance with legal standards but also vital for maintaining the trust’s integrity and the interests of its beneficiaries.

Providing clarity and ensuring proper communication within the relevant trustees is essential to navigate the complex world of property transactions and the associated legal requirements.

Useful article? You may find it helpful to read the original guidance here: HMRC SDLT: SDLTM31730 – Application: Trusts and powers

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