This is a running total of the tax paid by the trustees less any tax credits that have been taken out of the pool by the beneficiaries.

HMRC use this method to ensure that any tax reclaimed by the beneficiaries of a discretionary trust, does not exceed the original amount of tax paid by the trustees.

A record of the tax pool must therefore be maintained by the trustees and sent to HMRC with along with a copy of the trust return.

If you have any question in relation to trusts or if you need help with your trust return then please request a free consultation.

These are genuine management expenses that can be deducted from the gross income of the trust.

They are set against dividend income in priority to other sources of income. If there is insufficient income to meet the management expenses then they are set again interest then non-savings income.

When deducting trust management expenses, these must first be grossed up at appropriate rate of tax, in the income tax computation.

The rates of tax depend on the type of trust that you are dealing with. IIP trusts pay tax at the basic and dividend ordinary rate of 20% on interest and rental income and 8.75% on dividends.

Trustees of an IIP are not entitled to a Personal Savings Allowance or Dividend Allowance and the trustees cannot claim a deduction for any trust management expenses.

Discretionary trusts pay tax at the “Rates Applicable to Trusts” on accumulated or discretionary income. This is charged at a flat rate of 45% for savings and non savings income and 39.35% for dividends.

Trustees are not entitled to a Personal Savings Allowance or Dividend Allowance but relief is available for some trust management expenses incurred.

A form R185 is a statement of income from trust. It’s used to inform beneficiaries of the amounts paid or entitlements to income from a trust. The beneficiaries will use the form to complete their own self-assessment tax returns or tax refund forms.

The UK tax year runs from 6 April and ends on 5 April of the following year. Trust returns are due on the 31 January following the end of the tax year.