Bare Trust tax advice

by **mo68** on Sun May 22, 2011 1:40 pm

Hello,

I have a bare trust setup for me as I'm in the strange position of not handling money for religous reason. When this trust was setup I sent a form to the Tax people with the amount I would be depositing a donation for work that I have carried out for a charity.

I phoned the tax office last year and asked them for some tax advice as more money had been put into the trust.
The tax people said I only pay tax on the income the trust generates. The trust does not make any income from the money in the account.

My trustee again asked me this year about tax. So i'm unsure again can somebody help me. All the money given to the trust is donation (although some organization ask for a invoice for there system).

I'm not doing this to avoid tax...if you could help me that would be great.
thank mo

by **Lee Young** on Sun May 22, 2011 6:23 pm

Whoever the beneficiary of the trust is the person who owns the cash and investments in the trust and it is that person who must declare the income in the trust, or indeed any capital gain if that is relevant. The trustees have no tax obligations.

by **mo68** on Sun May 22, 2011 6:29 pm

Thank you. I understand that, what I dont understand is why the tax office said I did not need to register for tax in the first place. Its say is something changes please contact them. Which I did and they said on if the income makes money do I have to pay tax?

by **tax_schmax** on Mon May 23, 2011 9:43 am

Is the money in an account? Is the money in an investment?

by **mo68** on Mon May 23, 2011 10:33 am

yes money is bank account and no it is not invested. When I filled in the form to send back to the tax people in the beginning. I mentioned that all the work I do is by donation. I think now this is the reason they did not register me for tax and I'm guessing.

by **Lee Young** on Mon May 23, 2011 1:42 pm

IF THE MONEY IS YOURS THEN THE ATTENDANT TAX RESPONSIBILITIES ARE YOURS, NOT AS A TRUSTEE BUT AS AN INDIVIDUAL TAX PAYER.

by **section 44** on Mon May 23, 2011 3:41 pm

It might be worth clarifying first whether or not this actually is a bare trust with you as the beneficiary. There are a few contradictions in your posts.

Broadly, if this is a bare trust then you have an absolute and immediate right to the capital and income held in the name of the trustee. The trustee has no discretion over the assets held for your benefit and must follow your instructions.

by **mo68** on Mon May 23, 2011 5:36 pm

Thank you all - I think I better get back to the tax office and/or find a accountant. Its not so easy to discuss over the net

by **tax_schmax** on Mon May 23, 2011 5:45 pm

When the tax office refers to the income the money makes, in this instance, it is the interest. Some accounts carry no interest but most do, even if it is apparently insignificant. If there is interest being earned, there is a tax liability to go with it. If we can agree that you do in fact have a bare trust, I think we also all agree that you have the corresponding tax liability. The tax office expect you to pay any tax on any interest the donations attract.

A bare trust is like somebody else actually holding your notes for you. They are still your notes, it is just that your hands are not being dirtied by holding the cash. Someone (or a bare trustee) holding your money does not make it theirs; it is still yours.

by **mo68** on Mon May 23, 2011 5:57 pm

okay yes I know that I have a bare trust, i've got the trust deeds and yes the analogy of notes is good an correct and was setup in that way.

The bank account i have is with a ethical bank and does not make any interest. I can see this from the bank details.

What I want to get clear on is that the donations I receive are not taxable. I'm starting to find the right words I think!
So sometimes i have to invoice a organization for the donations, that is the only way there system can deal with the donation. Other times people have the trust details and just put money into it.

The last part is that I help out at a project and they have been offering to reimburse the host organization for my time (this has in the past been a religous organization) and for the last few years has been the trust. I have seen this as a donation. I have no employment contract, nothing.

again thank you for your time in helping me.